- posted
14 years ago
Awful CD rates these days...
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14 years ago
You need to shop around. My bank is offering 2.15% with $1K minimum. GMAC is offering 2.75% with $500 minimum. Of course, it's debatable whether or not GMAC will actually be able to pay that interest. But at least your principal is FDIC insured.
--Bill
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14 years ago
Yes do shop around, although it's nothing great, but certainly more than 1%. My bank money market acct is 1%, so a CD should be higher.
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14 years ago
Indeed they have fallen dramatically. Even if you shop around, the highest rates are < 3% and falling rapidly.
If you're looking for super-safe stuff, I'd recommend staying away from bonds. The way the market has been, you cannot even trust the ratings agencies, so the AAA rating of bonds is meaningless. Stick with the CDs and treasuries for now (and treasuries are offering even lower rates than CDs but if you have millions to stuff, that may be your only choice).
You could also look into buying I-bonds through your bank or treasurydirect, but there is a $10K limit on those ($5K paper
- K online). The rates on those vary with inflation. The interest is exempt from state income tax, and federal taxes can be deferred to when the bond is redeemed. formatting linkRead up some place on tax-free vs taxable bonds/bond funds. Almost any book on investments and/or financial planning will cover the topic adequately. You could start here:formatting linkIn general, corporate bonds are taxable, treasury bills/bonds are exempt from state income tax, and municipal bonds are exempt from both state and federal income tax.
Anoop
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14 years ago
I have a SEP with Fidelity so am limited to what CD's they have. They do have an exhaustive list, and all are between 0.5% for short term and 1.5% for long term ( > 3 years ).
I notice Citibank is offering a nice 12-month cd at 2.5%, but I can not use that one.
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- posted
14 years ago
The benefit of a CD is not the return. Historically, net of inflation and taxes the net-net return is negative.
The benefit - the importance of which varies from saver to saver - is that most CDs bring with them FDIC coverage up to the insurance limit.
To try for a higher return, you're going to have to give up the FDIC coverage - so are you willing to do that? Your answer to that question will help us give you suggestions.
Two other points:
- One of the risks of investing is that we don't know what all of the risks are.
- The best investments are those you understand.
-HW "Skip" Weldon Columbia, SC
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- posted
14 years ago
or, you could shop around and get the best rate you can find for an FDIC insured investment. It might not historically beat inflation, but that is no reason to throw in the towel and accept the worst CD rates out there.
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14 years ago
Sure, what would be the next level of investment above CD, but without FDIC insurance?
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14 years ago
Arguably the closest thing to a short-term FDIC backed CD is a T-Bill. For more, Google on "Treasury Bills".
-HW "Skip" Weldon Columbia, SC
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14 years ago
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- posted
14 years ago
you are dancing this guy around in circles.
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14 years ago
The rates seem half of what CD's are offering, i.e just 0.1-0.3 %?
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14 years ago
On Apr 21, 2:06 pm, "Gil Faver"
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14 years ago
On the risk/return scale, it seemed he was asking for next higher thing. The fact that T-bills are not FDIC insured is a 'good thing', they are backed by a higher authority.
Joe
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14 years ago
he was asking for higher return, albeit with greater risk. It was already stated T-bills pay very little. Now he was directed to T-bills, for a lower return and lesser risk. Not where he wanted to go.
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14 years ago
Agreed, thought that's what I said. Op asked for higher risk/return Skip mentioned the next point on that curve but in other direction. No big deal.
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- posted
14 years ago
Here's another alternative (not what you asked for) idea:
Assuming you are a young investor (under 45), I suggest it may be more important to learn about investing than to earn another percent or two in the short-term. If you agree, to proceed:
- Pay off all debts except mortgage and set aside ,000 (,000 if single) in a bank savings account as emergency reserve.
- Read about Vanguard's Total Bond Market Index (VBMFX) and Vanguard's Total Stock Market Index VTSMX) at formatting link. Then send each ,000.
- Leave them alone - no rebalancing, nada - for 3 years.
- Weekly note the changes in each. Send each a few hundred monthly through ups and downs. Read business news, posts here, etc. to uncover reasons for the changes in fund values.
After 3 years you'll be a pretty good investor. At least for the basics you will - the Ph.D. in investing comes after going through a full economic cycle (usually about 20-30 years.)
It's just an idea. Try it or not.
-HW "Skip" Weldon Columbia, SC
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14 years ago
That would be the couch potato portfolio. :-)
Anoop
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14 years ago
The Original, Patented Scott Burns Couch Potato Portfolio is exactly 50/50 VBMFX and VTSMX. See
Yep.
-- Doug
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14 years ago
I personally put $18k into Vanguard junk bond fund (high yield corporate) this March. I have never invested into junk bonds before.
i