What a double digit yield is actually telling you

Yield is compensation for risk. When a private real estate deal or similar investment offers two or three times what a Treasury pays, the market is not being generous. It is pricing in the chance of late payments, reduced distributions, or losing principal outright. If the return were truly safe, institutions would bid the yield down long before it reached a retail brochure.

The second issue is liquidity. These investments typically lock your money up for years. You cannot sell on a bad Tuesday because there is no exchange and usually no buyer at a fair price. For someone years from needing the money, that may be an acceptable trade. For money earmarked for retirement income, a home purchase, or an emergency, it is not.

That is the dividing line I use. Money you can genuinely tie up for years, and stomach losing, can be a candidate for this corner of the market, sized as a small satellite position. Core retirement savings, the money your lifestyle depends on, should not be chasing a headline yield.

So when you see 10 or 12%, read it as a warning label rather than an opportunity. Ask what has to go right for that yield to be paid, who gets paid before you, and how you would exit early. The answers tell you what you are actually buying.