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etired? You crave income. A long Treasury bond pays 5%. Not enough to cover the bills. A Treasury fund shows up with a 10% yield. Tempting, isn’t it?
You are now entering the world of yield fantasies. Wall Street is happy to feed these fantasies, and to soak you in the process.
The true yield of an investment is what it can throw off, indefinitely, without any erosion of capital. The fruit, not the tree. It is only so much. There is no way to make it bigger. If you spend more than that, you are dipping into capital.
Evidence that people don’t understand this: the proliferation of funds with “income” in the name and double-digit payouts. Look closely at these things and you see that, one way or another, they are in effect handing investors their own capital back.
