Glossary · Investing & tax
What is Yield?
The income an investment generates over a period, expressed as a percentage of the price or principal. Used for dividends, interest, rents, staking rewards — anywhere recurring cash flow comes from a held asset.
Last updated April 30, 2026
How it works
Different yield types you'll encounter:
- Dividend yield — annual dividend payments divided by current share price
- Bond yield — for current-yield, annual coupon payments divided by current bond price; for yield-to-maturity, the total annualized return if held to maturity
- Savings yield (APY) — interest rate paid on deposit accounts, with compounding factored in
- Real estate / REIT yield — annual rental income or distributions divided by property value or share price
- Crypto staking yield — annualized rewards earned from staking, in % of staked amount
- DeFi yield — broad term covering lending APY, LP fees, yield-farming incentives
The mechanics of "what produces the yield" matter enormously. A 5% yield from US Treasury bills is mathematically the same number as 5% yield from a junk bond, but the risk profile is wildly different.
Example
A $100k holding at various 5% yield sources, after 1 year:
| Source | What you held | What you earned | Risk profile |
|---|---|---|---|
| 12-month T-bill | US Treasury | $5,000 in interest, principal returned | Near-zero default risk |
| Apple stock | AAPL ($100k worth) | ~$500 in dividends + price change | Equity volatility (±20%/yr typical) |
| BBB-rated corporate bond | Corporate IG bond | $5,000 + price change | Default risk + duration risk |
| HYSA at SoFi | Cash | $5,000+ in interest | FDIC-insured to $250k |
| ETH staking | 30 ETH ($100k at $3,400) | ~1.5 ETH | Smart-contract + slashing + ETH price risk |
| Aave USDC supply | $100k of USDC | ~$5,000 in interest | Smart-contract + USDC peg risk |
Same headline yield, very different real risk-adjusted returns.
Why it matters
The two big mistakes around yield:
1. Chasing yield without understanding risk. A 12% APY in DeFi isn't a free 7% over Treasuries — that 7% spread is paying you to take some specific risk (smart-contract bug, token incentive sustainability, peg failure). The assets generating high yields are doing so because someone needs to be compensated for the risk, and you're that someone.
2. Treating "yield" as universally comparable. A 5% bond yield is locked in (if held to maturity); a 5% LP yield is variable and could be 3% next month or 8%. Comparing snapshot yields across asset classes without understanding their volatility distorts the comparison.
Useful framing for evaluating a yield offer:
- What asset is the yield coming from?
- Who pays it (the borrower, the protocol's emissions, etc.)?
- Is the yield sustainable from real revenue, or subsidized by token issuance that will dilute?
- What's the worst-case scenario for the principal — drawdown? haircut? total loss?
- Does the yield account for taxes on receipts (most yield is taxable as ordinary income)?
A sane yield-bearing allocation includes assets at multiple risk tiers — Treasuries / HYSA at the low end, broad-market dividends and corporate bonds in the middle, DeFi yield as the smaller higher-risk slice. Concentrating an entire portfolio in any single yield source — including ones marketed as "stable" — has historically gone badly during stress events.