In this low-interest rate environment, investors are so desperate for more income, they are chasing high yields and riskier yields.
It’s all about yield. High yield – but not too high.
Investors see mouth-watering yields of 12%, 14% or even 16% advertised by investment firms and they buy, buy, and buy more. But once yields start inching above 12% (or 14% in some exceptional cases) it usually means there’s something wrong with earnings or the company itself.
The research departments of investment firms are cranking out new and complicated “high-yield” income investment products faster than any normal investor can keep up with them. They’re out to profit from the Baby Boomer generation, and have launched a full frontal attack on the market to get your dollars.
Some of these new investments are highly profitable to you, the investor. But all of them are profitable to the Wall Street firms that sell them. Believe me when I tell you – you’re the one who takes on risk, not them.
Companies that investors are buying today that are being set-up for a big dividend cut in the future or a substantial loss of capital.
Here are 5 high yield sucker plays that you should avoid in your chase for income.