What Is the Seven-Day Yield?
The seven-day yield is a standard measure of the annualized yield for a money market mutual fund. It is usually calculated based on the fund’s average seven-day distribution, and allows for the direct comparison across many money market funds.
The seven-day yield may also be referred to as the seven-day annualized return.
Key Takeaways
- The seven-day yield is a method for estimating the annualized yield of a money market fund.
- It is calculated by taking the net difference of the price today and seven days ago and multiplying it by an annualization factor.
- Since money market funds tend to be very low risk, the higher the seven-day yield the better.
Understanding the Seven-Day Yield
The seven-day yield is most often calculated for money market funds. This yield includes distributions paid by the fund plus any appreciation over a seven-day period, minus averagefees incurred during seven days.
The seven-day yield helps investors compare across money market funds. The seven-day yield can help to provide an expectation for the future return on investment. Similar to forward yield, its calculation is a projection that typically includes the average distribution from the fund’s most recent payout.
Many investors may choose money market funds to hold excess cash in various types of accounts. Retirement accounts and brokerage accounts often allow for the election of a cash deposit sweep into money market funds. The seven-day yield is one of the most common metrics provided for money market fund comparisons by brokerage platforms.
The basic calculation is as follows:
((A-B-C)/B) x 365/7.
Where:
- A = The price at the end of a seven-day period plus average weekly distributions.
- B = The price at the beginning of a seven-day period.
- C = Average fees for the week.
- 365/7 = 52.14 which represents the number of weeks in a year.
The seven-day yield provides investors with an estimate of the yield they can expect over the next year, based on the average payouts of one week. The methodology for the seven-day yield can vary.
Seven-Day Yield Comparisons
Barron’s list of the industry’s best money market funds by seven-day yield are reported with and without compounding. The list shows the industry’s highest yielding money market funds by popular industry categories. Money market categories for investing can include government, prime and tax-free municipals. Tax-free municipals will be exempt from federal tax and also exempt from state tax if the investment corresponds with the investor’s state of residence.
Seven-Day Yield Example
Let's look at an actual example of the seven-day yield. The Vanguard Federal Money Market Fund (VMFXX) reports the top seven-day yield in the government category as of January 3, 2018. It has a simple seven-day yield of 1.22% and a compound seven-day yield of 1.23%. Its most recent distribution of $0.00097 was paid out on January 2, 2018, giving it an average seven-day distribution of $0.0002425.
The seven-day yield calculation is as follows:
($1+$0.0002425-1-Expenses)/$1 x 365/7 = 1.22%
Investors should be cautious of seven-day yield calculations since a fund’s seven-day yield can sometimes vary with distributions if an average is not used. The 30-day yield can also be good for comparison since its calculation is a hypothetical annualized return based on payouts from the past 30 days.
FAQs
The formula involves taking the value of a share including earnings at the end of a 7-day period (X), subtracting the value of the share at the beginning of the period (Y) as well as shareholder fees and fund operating expenses (Z), dividing the resulting amount by the value of the share at the beginning (Y again), and ...
What is the formula for the 7 day yield? ›
The calculation is performed as follows: Take the net interest income earned by the fund over the last 7 days and subtract 7 days of management fees. Divide that dollar amount by the average size of the fund's investments over the same 7 days. Multiply by 365/7 to give the 7-day SEC yield.
Is 7 day yield the same as apy? ›
Traditional bank savings accounts calculate interest using annual percentage yield (APY), while money market funds use the 7-day SEC yield formula. APY is the real rate of return earned on an investment, considering the effect of compounding interest.
What is 7 day yield on Spaxx? ›
The 7-day yield is the average annualized dividends earned by a fund over the past seven days. It reflects the potential yield of a fund over a year if all the securities in the fund were held to maturity.
How is daily yield calculated? ›
How Is Yield Calculated? To calculate yield, a security's net realized return is divided by the principal amount.
Does SPAXX compound daily? ›
Money market funds like Fidelity Government Money Market (SPAXX) accrue interest daily, and the system deposits this interest on the last business day of the month. Previous payments can be reviewed via your "Activity & Orders" tab on Fidelity.com.
How do you calculate yield formula? ›
To find the yield percent we use the equation: percent yield = actual yield/theoretical yield x 100.
What rate is the Fidelity money market paying? ›
Refine
| Fund Name | Date | Yield |
|---|
| 1 Day |
|---|
| Fidelity Treasury Only Money Market Fund Symbol FDLXX CUSIP 31617H300 Fund # 415 | 06/12/2024 | 4.93% |
| FIMM - Money Market Portfolio - Class I Symbol FMPXX CUSIP 316175207 Fund # 59 | 06/12/2024 | 5.25% |
| FIMM - Money Market Portfolio - Class II Symbol FCIXX CUSIP 316175843 Fund # 541 | 06/12/2024 | |
30 more rowsMoney market funds can protect your assets during a recession, but only as a temporary fix and not for long-term growth. In times of economic uncertainty, money market funds offer liquidity for cash reserves that can help you build your portfolio.
What is the difference between yield and APY? ›
APY is the annual percent yield that reflects compounding on interest. It reflects the actual interest rate you earn on an investment because it considers the interest you make on your interest. Consider the example above where the $100 investment yields 5% compounded quarterly.
The 7-Day Yield is the average income paid out over the previous seven days assuming interest income is not reinvested and it reflects the effect of all applicable waivers. Absent such waivers, the fund's yield would have been lower.
How much interest is SPAXX paying? ›
Dividend Yield Analysis
| SPAXX | Category High |
|---|
| Dividend Yield | 5.07% | 2.17% |
SPAXX is Fidelity Investment's prime money market fund. If you have a Fidelity brokerage account, your idle cash is automatically invested in SPAXX to earn its dividend.
How do you calculate the 7-day current yield? ›
The formula involves taking the value of a share including earnings at the end of a 7-day period (X), subtracting the value of the share at the beginning of the period (Y) as well as shareholder fees and fund operating expenses (Z), dividing the resulting amount by the value of the share at the beginning (Y again), and ...
What is a good yield? ›
All in all, though, a good yield is anywhere between 5 and 8%, but you should aim for 7 to 8% or beyond for the best yield on property investment. So when you're wondering what is a good rental yield for your property, aim for somewhere between these numbers.
Is yield the same as interest rate? ›
Yield represents the total earnings from an investment, including interest. Interest rate is the percentage of the amount borrowed or paid, over a principal amount. Yield typically includes the amount of interest earned.
What is 7 day money market yields? ›
The 7-Day Yield represents the annualized fund yield based on the average income paid out over the previous seven days assuming interest income is not reinvested and it reflects the effect of all applicable waivers. Absent such waivers, the fund's yield would have been lower.
What is the formula for weekly product yield? ›
Divide the number of good, error-free units produced by the total number of units produced. This gives you the proportion of good products you've created out of the total. Then, multiply the result by 100, which gives you the answer in percentage form.
How do you calculate yield method? ›
The earnings yield is the inverse ratio to the price-to-earnings (P/E) ratio. The quick formula for Earnings Yield is E/P, earnings divided by price. The yield is a good ROI metric and can be used to measure a stocks rate of return.
What is the 7 day yield for Fdrxx? ›
Details
| Product Type | Government |
|---|
| 1-Day Yield | 4.98% as of 06/13/2024 |
| 7-Day Yield | 4.98% as of 06/13/2024 |
| 30-Day Yield | 4.99% as of 06/13/2024 |
| Daily Mil-rates | 0.000136334 as of 06/13/2024 |
19 more rows