A High-Yield Chase

I screened for stocks, looking only for high-yield. I ignored business fundamentals, research and market conditions. Along came a 12 percent yield — woo-hoo! The stock also appeared to be on sale after a price dip. Turns out it was a good company but a horrible time to buy it. (It's a short-term commercial real estate lender.) Which sectors have been hard-hit lately? Finance and real estate — and I invested in a company that combined both. The stock has now fallen by some 50 percent. What did I learn? One, yield is only part of the picture. Two, hold a real estate investment trust (REIT) in a tax-protected Roth IRA or traditional IRA, where highyielders can do so much better.

— M.S., Durango, Colo.

The Fool Responds: Right you are — you always need to examine many aspects of a company, not just one, such as yield or profit margins or revenue growth. It's also smart to park investments that pay hefty dividends in tax-advantaged accounts, to delay (or avoid altogether, via the Roth) paying taxes on them.

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