A. It might be tough because naturally there are many questions you could ask for such high yield investment products - is the high yield really sustainable? Would price erosion more than offset the high yield and lead to net investment loss? Even worse, many of the 10% plus yields are actually misleading and not reliable.
Look into a company's fundamentals will help you determine whether the high yield is sustainable or not. For example, nTelos (NTLS) is a regional wireless company, it offered double digit yields just 2 years ago, now offers no yield at all, because its business fundamental simply couldn't sustain the high dividend payouts. You need to do your due diligence when select an investment product.
Prudence is required when investing in some of the corporate bonds as well. You should avoid the bonds that are rated at C- or worse, even they currently offer 10% yields. You need look behind the yields - what's supporting the high yield? Risky real estate projects? There is no need to gamble on that.
Some closed end funds also distribute 10% to shareholders, but it's just like a pyramid scheme - it would sell new shares or borrow to return the capital. Of course you should stay away from those funds.
So, you might wonder - are there places the 10% or above yields could still be trusted?
The answer is maybe, we will look at 3 potential areas in our next several blog posts.