YTM (Yield to Maturity) — Mutual Fund Term Explained

The annualised return if a bond is held to maturity. Used as a proxy for expected future returns of a debt fund.

Yield to Maturity (YTM) is the total expected return if a bond is held to maturity. For debt mutual funds, the portfolio YTM is published as an indicator of expected returns.

Note: YTM is a forward-looking estimate, not a guarantee — credit defaults and rate changes can cause actual returns to differ.

Formula

YTM is the discount rate (r) that satisfies: Price = Σ[Coupon/(1+r)^t] + Face/(1+r)^n

Related terms

• Modified Duration — For debt funds: the approximate % change in NAV for a 1% change in interest rates. Higher = more sensitive to rate changes = more interest rate risk.
• Credit Risk — The risk that a bond issuer defaults or is downgraded, causing the fund's NAV to fall sharply. Higher-yield bonds carry more credit risk.
• Debt Fund — A mutual fund investing in fixed income securities — bonds, G-Secs, commercial paper. Lower risk than equity but also lower returns.

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