The Most Important Retirement Schedule You Will See All Year | Personal finance

  The Most Important Retirement Schedule You Will See All Year |  Personal finance

Why yield matters

Image source: Getty Images.

Highlights

  • There’s a clear trade-off between yield and risk. If you want to achieve higher yields, you have to accept an increased likelihood of something catastrophic happening. High-yield bonds carry additional default risk. High dividend yields are signals that the market expects a company to reduce its distributions.

  • Yield dictates returns for income investors. Growth investors can always theoretically pick the next Amazon, but there’s more of a cap on income strategies.

It’s not responsible for investors to fill their portfolios with risky securities. In fact, they should probably be ignored altogether. You want to reduce volatility and big losses. Years of hard work can be destroyed by investment plans that are needlessly aggressive.