Yield
Yield is considered a key factor in investing. While an investor should evaluate several factors that constitute his financial objectives including risk, steady income stream and diversification - the return, or yield, on a bond investment is a primary concern. All other investment factors being equal, an investor should choose the higher yielding investment rather than a lower yielding investment. But evaluating those “other” factors makes comparing the yields of different bonds complicated.To evaluate yields, bonds were grouped together into equivalency classes to ensure yields are compared to other bonds with similar characteristics. Just as we wouldn’t expect the prices of two homes in different neighborhoods to be a fair comparison, we can’t compare bonds that have different characteristics. The main characteristics chosen to provide an “apples to apples” bond yield comparison include:
1. The market rating – equal number of assigned stars.
2. The type of bond - GO or Revenue.
3. The individual state tax treatment of municipal bonds categorized into various criteria.