So empirical research into lending markets has typically found…
So empirical research into lending markets has typically found that, beyond a certain point, higher-yielding loans tend not to lead to higher returns-in fact, the further lenders step out on the risk spectrum, the less they make, as losses increase more than yields. Return is yield minus losses, not the juicy yield posted on the cover of a term sheet. However, investors tend to focus on the juicy promised yield and not on the high future expected losses, which they should subtract to estimate expected return. I call this phenomenon "fool's yield."
— from Decisions & Choices (Decision/Choice/Focus/Forethought/Consequences) · Humble Investor: How to Find a Winning Edge in a Surprising World by Daniel Rasmussen