You buy 1,000 shares of Dripping Fresh Inc., a maker of specialized coffee machines, at $25 a share. The company announces better-than-expected earnings, and the stock jumps to $30 a share. You sell, earning a $5-per-share profit, or $5,000 total.
Since you earned that $5,000 on an initial investment of $25,000, your return totaled 20%. That 20% represents your gross yield on the investment. It's the return you made before having to pay any taxes or expenses.
To earn that $5,000, you had to pay your broker. Plus, you only knew about Dripping Fresh because the bathroom attendant at your favorite restaurant gave you a tip. So, you want to kick back a little to him. Plus...that $5,000 will eventually get whittled down by taxes.
After all that, you're left with $3,500...a net yield of 14%.