| We all know what the word 'yield' means. It tells us | | | | probably won't materialize. |
| how much we can expect to get - or earn, in some | | | | So where does this leave you? Are these curves bad |
| cases - for our investment. This could refer to | | | | for your investments, or is there more to this than |
| planting seeds, investing money or many other | | | | meets the eye? In truth they aren't bad at all. The |
| situations. If we invest money in stocks of some | | | | only thing you need to remember is to monitor your |
| kind, the yield we get will be the amount of profit | | | | investments to see if you can spot any inverted |
| we make on that investment. But what about an | | | | curves as they reach the peak of their cycle. This is |
| inverted yield curve - and what does it mean for | | | | when you need to bail out, otherwise you will not |
| stock investors? | | | | realize the best potential and returns from those |
| Imagine a graph where the curve gradually goes | | | | stocks. |
| upwards - signaling better returns the longer you | | | | These curves are closely tied in with interest rates |
| keep your investment in place for. Now imagine that | | | | too. Indeed it has been proven in the past that a |
| curve flipped over from top to bottom, so that what | | | | curve of this nature can be a precursor to a |
| was a gradually climbing curve now shoots upwards | | | | recession. It doesn't always happen, but it happens |
| quickly before dipping down again. This is what we | | | | more often than not to be down to just chance. You |
| call an inverted yield curve. | | | | need to think about short term and long term when |
| Now you can see from this that such a curve means | | | | it comes to those rates. The short term ones are |
| you will see some nice profits from your stock | | | | habitually lower than the long term ones, but when |
| investment in a very short space of time. But the | | | | that gets flipped on its head, we see an inverted |
| longer you leave your investment in place, the lower | | | | curve. So if you are thinking of investing or you |
| those returns will go. In fact, it would be in your best | | | | already have some investments in place, remember |
| interests to bail out early instead of waiting for | | | | the inverted yield curve and keep an eye out for it. |
| better returns - because those better returns | | | | It could save you from losing money. |