Plot FNMIX against PFN. What do you get? Sub par returns, sub par yield. Sometimes risk is rewarded. I would rather have a 10% yield vs 4.5% and weather a little volatility.
With respect, there is a false premise baked in here.
Markowitz and his Modern Portfolio Theory pals have successfully sold the idea that volatility is risk and vice versa. This is necessary for them because they have no idea how to measure risk but they can pretend that they are looking at Gaussian data and can play with standard deviations, T-tests, efficient frontiers, etc. more or less forever.
This apparently works for them. It got Markowitz a Nobel after all, but IMO it is misleading. Risk is also Enron, GE, Montgomery Wards, Lehman Brothers, Under Armour, megabank divididend cuts, etc. IOW, risk involves losing real money, not just playing statistics games or waiting out a market dip.
To the point for this thread, several investment ideas with real risk have been mentioned. For example, U-Haul would not be screwing around hustling retail investors if the professionals had not concluded that the interest rate being offered was not acceptable considering the risk level of the investment. I don't have to read a prospectus to know this. It's just simple deductive logic. Re "asset backed" small loans, really? Who is going to foreclose on that collateral, liquidate it, and send the retail investors their "asset backed" money? At absolute best the sellers of these loans are white hat guys, so the retail investors will get whacked only to the extent of court fees, legal fees, and the price discount necessary to dump the collateral.
Any deal for which there is no ready and liquid market has more risk yet. A forced sale will involve a lot of effort and a big discount if it can be done at all.
Volatility is not all there is to risk, and the riskier the deal the less important the volatility aspect is. Just MHO of course.