Sucker Yields (and How to Avoid Them)

Money published an article in 2016 titled “The Science of Why We Fall for Scams That Are So Obviously Scams.”

The article cites Peter, a retired lawyer, who lost $2,000 on a literal get-out-of-jail scam. It was supposedly to keep his step-grandson out of jail: something he admits he’s “much too smart” to fall for.

Or at least he should have been…

Unfortunately, mere brains aren’t enough to avoid such traps. It also takes mastery over our emotions, which can fall fast and hard when something near and dear to us is on the line, whether that’s a loved one, our own pride, or our dreams.

All of us have a weak spot. Probably many of them. And they have a bad habit of getting us in trouble far too often.

This tendency applies to the world of investing just as easily as anything else. There are so many ways we can lose our cool… and our cash… if we don’t watch out.

Perhaps complicating the situation even more, it’s not that we always have to guard against literal thieves trying to sell us a load of hooey. Although that does happen, it’s far less likely than getting taken in by that well-meaning “hot tip” from our neighbor.

Or our own fascination with get-rich-quick schemes.

While not a scam in the literal sense, there are plenty of companies with dividend yields that sound too good to be true. That’s because, more often than not, they are.

I call these “sucker yields.” And today, I’ll tell you how to avoid them.

To be fair, most sucker-yield companies aren’t going out of their way to damage your finances.

They’re offering what they’re offering because of poor management, really bad luck, or a combination of both.