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Re: comparing ROI yield with int rate on home eq loan[ Message Board ] [ Archives ] [ Search ] Posted by Mark on February 12, 2006 at 19:36:39:In Reply to: comparing ROI yield with int rate on home eq loan posted by Tom Seeley on February 12, 2006 at 17:33:29: : I own some shares of XYZ mutual fund, which I track in FM. I made an initial purchase in 1998. I've taken some redemptions. I've reinvested all dividends and cap gains paid while I've owned the fund. : Over the period I've owned it, FM says the ROI yield, annualized, is 5.45%. : The purpose of this message is to be sure I'm interpreting and using ROI yield correctly in one personal decision I'm trying to make. : I have a home equity line of credit (HELOC) with an adjustable interest rate on my unpaid balance which has risen above 5.5%. : I'm trying to decide if it's better to take money out of XYZ, which is earning 5.45% and pay the balance I owe on the HELOC, which is costing me 5.5%. : In other words, by using the parameter FM calls ROI yield for my XYZ fund, am I using the right performance measurement parameter for that part of my decision? : I'm well aware a lot of factors besides relative interest rates are involved in my decision. I'm not asking about those factors. All I'm asking now is am I using the RIGHT parameter for the performance of my mutual fund, if I use ROI yield as calculated by FM. : I'm also not asking about how smart I was to do the HELOC in the first place, so please don't waste your time (or mine) commenting on that part of this message either. Just please help me decide which parameter about the performance of my mutual fund that I should use to help make the decision I'm trying to make NOW. : Thx.
I believe your thought process is correct, and the ROI yield is the appropriate figure to compare against the loan interest rate. The ROI yield is showing how well your invested money performed, in terms of an annualized yield. I am not sure how the 5.5% HELOC rate is calculated, but I can tell you that the Fund Manager yields are true yields. (See the online help for the equations used.) The ROI yields factor in all the distributions, and any appreciation through share price increases. If you timed the market well by purchasing at low times, then your ROI would be higher. The "Fund Performance" yields on the other hand only look at the performance of the underlying investment. These yields ignore when and how you invested in that investment. Your market timing doesn't affect the Fund Performance yields. Thanks,
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