Understanding the Results

In order to understand the results, assume the following:

Investment Horizon: 10 Years
Current Yield: 2.0%
Money Market Yield: 0.25%

Upon entering these figures, the chart calculates the actual return (highlighted in RED) that is achieved as determined by:

  1. the number of months waited before investing
  2. and the investing at a future realized long-term yield

To illustrate, let's assume a waiting period of 30 months before investing in anticipation of rising rates.  After that time, rates in fact do rise 50 basis points to 2.50%.

Even though bond yielding 2.50% is available in this scenario, the money market yield earned during the waiting period lowers the average annual return to only 1.94%, 6 basis points lower than the 2.0% that could have been earned by simply buying a 10-year investment today.

The break even yield chart calculates the yield that must be achieved in the future simply to break even with what is locked-in today.  Using the same example, if you waited 30 months before investing a yield of 2.59% would be needed to break even with the 2.0% that could have been earned today. The sooner an investment is made, the sooner investment goals will be met in this scenario.