Yield Tilt Index Fund

AAA

DEFINITION of 'Yield Tilt Index Fund'

A type of mutual fund that allocates capital as a standard index, by replicating the holdings of a specified stock index, such as the Standard & Poor's 500 Index (S&P 500), except that the fund weights its holdings towards stocks that offer higher dividend yields. Stocks with higher dividend yields are given a greater portfolio weighting, making them represent more of the fund's portfolio than they otherwise would in the standard index.

INVESTOPEDIA EXPLAINS 'Yield Tilt Index Fund'

The rationale behind the creation of yield tilt index funds is based on the fact that dividend payments issued to shareholders can be subject to "double taxation", meaning that they are taxed once at the corporate level and then once again at the shareholder level.

Due to this effect, some investors contend that the market must value the share prices of high-yield stocks at somewhat of a discount to other stocks, so as to provide an increased return on high-yield stocks in order to compensate for the negative tax effects. The theory is that an investor who is able to purchase a yield tilt index fund in a tax-sheltered investment account may be able to outperform the index, since they receive the supposed valuation benefit but are sheltered from taxes on the dividends they receive.

RELATED TERMS
  1. Index Fund

    A type of mutual fund with a portfolio constructed to match or ...
  2. Tax Shelter

    A legal method of minimizing or decreasing an investor's taxable ...
  3. Dividend

    1. A distribution of a portion of a company's earnings, decided ...
  4. Dividend Yield

    A financial ratio that shows how much a company pays out in dividends ...
  5. Double Taxation

    A taxation principle referring to income taxes that are paid ...
  6. Annual Crediting Cap

    The maximum rate of index growth that an annuity will be credited ...
Related Articles
  1. The Lowdown On Index Funds
    Options & Futures

    The Lowdown On Index Funds

  2. Index Investing
    Mutual Funds & ETFs

    Index Investing

  3. Mutual Fund Basics Tutorial
    Mutual Funds & ETFs

    Mutual Fund Basics Tutorial

  4. Charts To Watch As Fed Raises Rates
    Chart Advisor

    Charts To Watch As Fed Raises Rates

Hot Definitions
  1. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  2. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  5. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  6. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
Trading Center