Now we will introduce a few investment products with 10%+ yields. We will start from Mortgage REITs.
A mortgage REIT is a real estate investment trust that doesn't actually own properties, instead, it borrows at short term interest rates to buy higher yielding mortgages.
Mortgage REITs may invest in securities backed by Uncle Sam, or they may own non-agency securities, which means the REITs face not only interest risk but also the risk that borrowers default which will diminish the value of the portfolio.
Because of the risks, Mortgage REITs are priced to yield much higher returns than property-owned REITs.
There are two Mortgage REIT ETFs - iShares Mortgage REIT Capped ETF (REM - 16% yield) and Market Vectors Mortgage REIT Income ETF (MORT - 13% yield).
Keep reading our final blog post of this High Yield Investment Products 101 series.