Falling interest rates are oftentimes looked at as a good thing. Falling rates usually mean lower mortgage rates. Falling rates are usually bullish for stocks.

But falling rates are not good news for everyone. Indeed, millions of investors who depend on fixed-income investments for cash flow get pinched when rates fall.

With interest rates on cash and fixed-income investments so low right now, there is a tendency for investors to "stretch" to earn higher yields.

This stretching takes the form of investing in riskier assets in order to generate higher yields.

The problem with stretching for yield is the following: There is no free lunch on Wall Street. You cannot get higher yields in bonds without assuming a higher level of risk.

Indeed, if you are buying corporate bonds where the yield is 12% or 13%, when the yield on a 30-year treasury bond is considerably lower, you are assuming a fair amount of risk. That corporate bond is paying such a high interest rate because there is concern that the company may have trouble down the road making its payments on the debt.

Remember that yield is often a proxy for risk. The higher yield - whether it's bonds or utility stocks or real estate investment trusts - the higher the risk that the yield will not be maintained. This is especially true when you invest in a security where the yield is three percentage points or more above the average yield for the group.

Bottom line: Stretching for yield usually results in disappointment when the dividend is cut or the interest payments stop. If you invest in "high yield" investments, make sure you diversify your bets across a number of investments.

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