Go Ahead, Reach for Yield

The best bets are in arcane areas such as commercial mortgage-backed securities, nonbank business lending and structured credit.

(Image credit: SOL STOCK LTD (SOL STOCK LTD (Photographer) - [None])

With bank rates and bond yields collapsing again, investors are embracing unconventional income securities priced to yield 6%, 8% or even 10%. Yes, spreads between Treasury yields and the yields you get from many such investments—including high-paying partnerships, closed-end funds, mortgage real estate investment trusts, specialty lenders and business holding companies—look dangerously wide, oftentimes six or eight percentage points. In theory, such a big gap implies that a recession is in the offing and will send investors running to higher-quality assets, or even cash. High-yield investments of all kinds got slammed in 2008.

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Jeffrey R. Kosnett
Senior Editor, Kiplinger's Personal Finance
Kosnett is the editor of Kiplinger's Investing for Income and writes the "Cash in Hand" column for Kiplinger's Personal Finance. He is an income-investing expert who covers bonds, real estate investment trusts, oil and gas income deals, dividend stocks and anything else that pays interest and dividends. He joined Kiplinger in 1981 after six years in newspapers, including the Baltimore Sun. He is a 1976 journalism graduate from the Medill School at Northwestern University and completed an executive program at the Carnegie-Mellon University business school in 1978.