“Is the risk really worth it?”
That was the question a retired professor asked after a dividend-paying stock he picked dropped nearly 8% in just a few weeks.
He had researched it carefully, attracted by a 15% yield. He wasn’t chasing quick wins, he simply wanted steady income from his U.S. investment account to support his life in Jerusalem.
But when the stock plummeted, so did his sense of control. It’s a perfect example of the hidden risks of high yields—where an attractive dividend masks the volatility underneath.
That’s when he saw the difference. A well-built portfolio isn’t about chasing high yields. It’s about aligning goals, managing risk, and building stability without second-guessing every market move.
The Hidden Risk of High Yields
High-yield investments, especially those offering payouts that seem too good to be true, often come with hidden costs: volatility, poor liquidity, or declining value. The hidden risks of high yields often go unnoticed until the market takes a turn. It’s easy to overlook that a 15% dividend may signal distress rather than strength. A sharp investor asks, “Why is the yield so high?” and “Can I live with the downside?”
We talked about risk as we reviewed his broader portfolio. His cash, CDs, and short-term government funds provided a solid foundation. The mistake wasn’t owning dividend stocks. It was putting too much faith, and too many dollars, into one position.
Aim for Calm Rather Than Risk
We didn’t overhaul the entire portfolio. Instead, we reviewed his riskiest positions and reallocated the new cash into short-term bond funds. These offered a more modest return but greater peace of mind. His anxiety lifted not because he earned more, but because his money worked with his unease, not against it.
Diversification = Peace of Mind
One final takeaway we discussed: professional money managers almost never let a single investment make up more than one to two percent of a portfolio at the time of purchase. They spread investments across different asset classes and risk levels to help keep income flowing, even if one part of the portfolio underperforms. It is a smart system, and there is a reason the pros follow it.
Want to see your portfolio better support your lifestyle? Book a free Cross-Border Financial Evaluation at www.profile-financial.com/call. Let’s see if, and how, we can help.
Douglas Goldstein, CFP® is the director of Profile Investment Services, Ltd. www.Profile-Financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates provide tax or legal advice.
Published June 25, 2025.