Yield to Maturity (YTM)

Mutual Funds lend money by buying bonds issued by the borrower at a declared rate of interest. These bonds can also be bought and sold through a bond market. Since a fund buys bonds at different prices (due to demand, supply, etc), the effective return, known as yield, is different from the interest rate that the bond pays. The YTM is the effective yield the fund will get if it holds its bonds until maturity. Since your gain is related to this, the higher the YTM, the better.