The theme this week on the Retirement Quick Tips Podcast is: Investments I Hate. 

Today, I’m talking about one of the most frequent offenders that I come across in the investments I hate category, and that is investments with a yield that is too good to be true. 

Last week, I attended a panel discussion with several real estate investors. It ran the gamut from residential to commercial investors to developers. While I appreciated their professional insight and learning more about real estate as an asset class, what disappointed me was the way some of them spoke about the returns and yields as if it was all baked in, guaranteed, and you couldn’t lose. 

Please show me where I can get a return of 10% on my money year-in-and-year-out and not get burned, and I will gladly write a check for any amount to invest with you. Seriously. But in reality, that’s not the case. I noticed their enthusiasm sounded much like real estate investors in 2005, claiming that real estate would only go up from here. That was clearly wrong. And many of them in the room had been investing in real estate in the last 10-15 years, and weren’t in the game during the real estate collapse in 2008-2009, which I found interesting. 

And it’s not just enthusiastic real estate investors, enthusiastically talking about their 13% rates of return, I talked to a client just today who saw an ad on TV for an investment yielding 10%. The only thing I know of that is yielding anywhere close to that, that isn’t junk is I-bonds. But the allowable investment in I-bonds is only $10,000, so if you have a larger portfolio, the $10,000 limit makes them a lot less appealing. 

But in a low interest rate environment, there are so many investors desperate for higher income and yield, that promises of high yield investments - whether that be in real estate, bonds, or something else, are usually too good to be true. So if the interest rate on pretty much everything else is only 2-3% and you’ve found something yielding 3 times that amount, it’s probably because it’s risky, illiquid, or both.

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance