Fidelity's "Understanding Terminology"
Fidelity Investments posted a piece which gives some basic definitions of fund performance terminology. Entitled, "Understanding Money Market and Bond Fund Terminology," it tells us, "As a trusted provider of liquidity management solutions for more than 40 years, Fidelity offers investors a choice of liquidity management products to strike the optimal balance between liquidity, risk, and return, based on their unique investment objectives and risk tolerance. When choosing investments for an effective liquidity management strategy it is important to understand the differences in how yield and return are calculated for a money market mutual fund versus a short-term bond fund." The brief defines, "7-Day Yield" as, "The average income return over the previous seven days, assuming the rate stays the same for one year. It is the Fund's total income net of expenses, divided by the total number of outstanding shares and includes any applicable waiver or reimbursement." Fidelity says of "Weighted Average Maturity (WAM), "A weighted average of all the maturities of the securities held in a fund. WAM can be used as a measure of sensitivity to interest rate changes and markets changes. Generally, the longer the maturity, the greater the sensitivity to such changes. WAM is based on the dollar-weighted average length of time until principal payments must be paid. U.S. Securities and Exchange Commission (SEC) limits the WAM of a money market mutual fund to 60 days." Finally, the "30-Day Yield is, "A standard yield calculation developed by the SEC. For bond funds, the yield is calculated by dividing the net investment income per share earned during the 30-day period by the maximum offering price per share on the last day of the 30-day period. The yield figure reflects the interest earned during the 30-day period, after the deduction of the fund's expenses, and includes any applicable waiver or reimbursement. Absent such waivers or reimbursements, the returns will be lower. The 30-day yield is sometimes referred to as the 'SEC 30-Day Yield' or 'standardized yield.'"
