Lock in risk free savings rates with treasuries or CDs?
Take out a mortgage?
Thanks Brandon!
Take out a mortgage?
Thanks Brandon!
So rates are falling, what's everyone doing?
- Thread starter General Tso
- Start date
I'm going to wait for the posters who've been telling us to short the market for the past 2 years for their advice. Then do the opposite.
New siding, windows, and doors.
Bids are coming in.
Will take a loan but will pay if off as soon as possible.
Bids are coming in.
Will take a loan but will pay if off as soon as possible.
So, I've had an idea for awhile and I've kinda spoke about it before but this well be the place to ask.
I have this idea where I put money in 12 month cds, call it 500 for each month, so that every month I'm rolling over a cd that has been marinating but I'm still fairly liquid should I ever want the money. Then using the interest to constantly buy a larger cd and let them just continuously roll. Once I got to the point, through interest and money added over time, that my 12 month interest equalled 100 bucks, buy a 3 year cd and start it at the three year level, basically getting to a point where the day would come that every month I would have a 1 year, 3 year, and 5 year cd to cash in the interest on, as a qay of building myself a quasi pension. ( if that's the wrong word don't grill me I mean that to say something where I could draw interest later in life and have the whole thing large enough each month I never touch the Capitol of the cd needed to pull the amount of interest I like)
Tell me why I'm an idiot.
I have this idea where I put money in 12 month cds, call it 500 for each month, so that every month I'm rolling over a cd that has been marinating but I'm still fairly liquid should I ever want the money. Then using the interest to constantly buy a larger cd and let them just continuously roll. Once I got to the point, through interest and money added over time, that my 12 month interest equalled 100 bucks, buy a 3 year cd and start it at the three year level, basically getting to a point where the day would come that every month I would have a 1 year, 3 year, and 5 year cd to cash in the interest on, as a qay of building myself a quasi pension. ( if that's the wrong word don't grill me I mean that to say something where I could draw interest later in life and have the whole thing large enough each month I never touch the Capitol of the cd needed to pull the amount of interest I like)
Tell me why I'm an idiot.
Because you're young enough to take on way more risk than a CD
I think it's called laddering. Lots of info out there on best strategies.
Because if you keep rolling the same length CD, you will get screwed on the interest rate. The banks change their deals all the time. Currently have a 6-month CD at 5% maturing in November. New 6-month CD rate is 0.3% and a 12-month is over 5%. Then it will be the 9-month at 5%, then 7-month. They hope you don't pay attention and just let them roll.
Continue to whittle down my overall debt load, almost to the finish line, which is nice.
Sounds ok while rates are at 5% (historically stocks still return more), but rates are dropping and no one knows how much. The fed's target is around 2%, which would lock your money up for low returns while stocks rip. Your strategy would bring returns, but you lose the big returns should the market continue to gain 7-10% a year. The strategy would be smarter in a rate hiking cycle, not rate lowering.
Last edited:
This would just be a portion of my portfolio. I'm trying to build a pension while also having a fairly liquid account should anything arise.
Better ROI is definitely something thought about though.
I don’t know old you are, but I wouldn’t diversify like this unless I was in my early 50’s, depending of course on your target retirement age.
hawkeyetraveler
HB Heisman
I keep as little cash in a savings account or (God forbid) checking account as possible. I have laddered high rate CDs, but I also went into municipal bonds and other low risk higher yield bonds. This is basically for emergency cash needs only. I plow every other last red cent into a weighted portfolio that is mostly stocks.
39
Maybe im.wrong but my thoughts were something small.like this would be best started now to have thr lowest initial investment give me max compounding Interest.
I am big on dividend stocks, and rather than DRIP I let the cash accumulate so I have something available of the market drops. I admit about a year ago I locked into some five year CD’s. So my purchasing power is limited, but I have some stable assets in my brokerage account.
I would screw the cd’s and buy as much DJT stock as you can. Skip any vacation this year and buy that stock.
If you want that money predictably liquid and basically zero risk, CD laddering is a fine concept when rates are strong. I did it for my kid’s college funds when they went in and it worked just fine.
Max the 401k (if you don't already). Max the Roth. Then max the HSA if it's available to you and use it like a retirement account.
What's your horizon? I assume at least 20 years. I would just buy "the market" in a fund mirroring the the market. There will be ups and downs but over decades you will have a lot more money invested in the stock market.
Because you're not spending it on hookers and blow
I am 100% in stock market. Dowjones and index funds for 401k
My emergency liquid assets are in Apple Microsoft and Amazon in brokerage account.
Nothing to be scared of on a long timeline.
I dont borrow money except for car or house and I need neither.
My emergency liquid assets are in Apple Microsoft and Amazon in brokerage account.
Nothing to be scared of on a long timeline.
I dont borrow money except for car or house and I need neither.
why don't you open a HY Savings account? I haven't looked lately but I think you might find rates better than a 1 mo or even longer CD. You're subject to interest rate risk but your laddering strategy would be as well IMO without thinking too much about it. I'd echo everyone saying you should really focus on maximizing your equity exposure at your age.
Automate $500/mo into a SP500 index fund (vanguard is great but there are other really low cost options) don't look at it if you are going to freak out in periods of volatility and trust that your pre tax returns over the long term will be about 10% per year (~8% post tax).
That last part got me thinking too - CD interest income will be taxed at your current tax income bracket - this could be higher than your LT cap gains tax which could make equity investments look even better.
Final thought - you can back into what amount of capital you would need to generate your monthly income requirements - without doing the math myself - it's going to be way more than you could build up with CDs at $500/mo over the next 20 some years.
Same.
Wife and I have always maxed our IRA's and put 10% into our ER plans.
Keep around $10-15k in an emergency fund.
However, I'm now almost 48 and REALLY want to start focusing on retiring early.
She upped her plan at work to 20% and I increased mine to 15%. Will keep doing IRA's of course.
Long story short, I'm going to start building up a non-qualified account to pay for expenses prior to age 65 (Medicare age).
This allows us to live without having to dip into retirement accounts. Will keep taxable income down making health insurance cheap.
She has an HSA option at work so might start that in 2025 as well and start heavily funding it.
Nothing like a good subtle brag thread on a Friday!!
To be fair, recessions / major market downturns have historically occurred AFTER the Fed cuts interest rates. We’re not out of the woods yet.
Sure, but this is why timing the market is so hard. Unless you’re down to a short time horizon for investment, it’s still best to just let it ride and pile cheap shares on top of more expensive ones bought earlier.
Not an idiot but there are better ways to park your cash and earn some interest.
Open a Vanguard Cash Plus Account, currently paying 4.50% APY.
Vanguard Cash Plus Account | Vanguard
Vanguard Cash Plus Account is a cash management account designed to offer a competitive yield on your short-term savings.
investor.vanguard.com
It's been explained before that the rates you get on this will not be the best vs the liquidity. Start with ibonds then go to high interest savings accounts. CDs are about the lowest paid investment option there is. You get the liquidity plus better rates. Before you do any of this pay off higher interest credit cards or other debt. THEN DON'T GET BACK IN DEBT ON THOSE ITEMS.
2 items I forgot 1 - mentioned in another post do 401k matches before any of this up to the max allowed. 2 - this is not why we think you are an idiot. Plenty of other evidence of that. Good luck!
Play around with the ACA calculator. If you can live off little reportable income medical insurance is damn cheap.
I know several doing this. Roth draws don’t count as income.
Going to retire at 59 and use this. Maybe sooner
This is how I have invested for the last 25 years. I put too many eggs in the Apple basket than is reasonable in hindsight, but it worked. Advice for a 39 year old would be dabble in stocks you like and put the rest in SPY
@Whiskeydeltadeltatango i just read something on reddit. Warren Bufffet parks his cash in $SGOV. I didn’t know that until today. It is a Treasury Bond ETF.
30 day yield 5.23% and Expense Ratio 0.09%. Net 5.14%
Description of $SGOV off Robinhood:
“iShares 0-3 Month Treasury Bond”
About iShares 0-3 Month
Treasury Bond
SGOV tracks a market-value weighted index of US Treasurys maturing in less than or equal to three months. The listed name for SGOV is iShares 0-3 Month
30 day yield 5.23% and Expense Ratio 0.09%. Net 5.14%
Description of $SGOV off Robinhood:
“iShares 0-3 Month Treasury Bond”
About iShares 0-3 Month
Treasury Bond
SGOV tracks a market-value weighted index of US Treasurys maturing in less than or equal to three months. The listed name for SGOV is iShares 0-3 Month
Similar threads
Latest posts
-
-
Jaxx DeJean Creating His Own Path, Forging Relationships with Iowa
- Latest: WaterlooChazz
-
