Total return investors want to buy a bond when its price is low and sell it when the price has risen, rather than holding the bond to maturity.
Since the maximum tax on capital gains was reduced to 15 % in 2003,
total return investors in a high income tax bracket may find advantages to holding their bonds in a taxable account.
So, if you are
a total return investor, SO may not be a good choice for you.
Nonetheless, for most portfolios in 2012, the way to guard against economic risk is to be
a total return investor in things such as Third Avenue Funds, rather than to be a cash return investor in U.S. Treasuries.
G&D ignore that the lower priced security may be more attractive to
the total return investor because of the lower price and the larger amount of retained earnings.
So, if you are
a total return investor, SO may not be a good choice for you.
Yield to maturity is a more complex calculation that attempts to incorporate
the total return an investor will receive from the time of purchase to maturity, including interest payments, the rise or fall in the price of the bond and the reinvestment of interest.