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a cd isnt an investment. its a savings vehicle. .its merely a holding place for cash that will either be needed short term, held as cash or money awaiting re-investment when you feel its time....
Last edited by mathjak107; 06-23-2010 at 03:51 PM..
3 years ago I was making 12k/year in boring CDs—I call that investing! I am concerned about the future prospects of CDs however. If & when interest rates go up all the Banks have to do is add on a FDIC fee/surcharge (only opinion) which will further erode the benefits of CDs as a saving/investing vehicle.
You see, the Banks don’t want the People to have any liquid/semi-liquid money on hand—they want you to borrow!
Basically with cash instruments after taxes and inflation they really end up just being savings vehicles and if your lucky you may actually be positive.....
unfourtunetly the forbes 400 is still awaiting their first cd investor ha ha
true investments have the potential for future growth or loss....
when investors refer to investing they dont usually refer to cd's or bank accounts.....
they may very well be apart of an investment portfolio but by themselves are not referred to as investments....
3 years ago I was making 12k/year in boring CDs—I call that investing! I am concerned about the future prospects of CDs however. If & when interest rates go up all the Banks have to do is add on a FDIC fee/surcharge (only opinion) which will further erode the benefits of CDs as a saving/investing vehicle.
You see, the Banks don’t want the People to have any liquid/semi-liquid money on hand—they want you to borrow!
I think you're right, it could be considered investing but that's tomato/tomaato. As mathjak alluded to it's just a different investment goal, more capital preservation than growth, as it's very difficult to build any significant wealth using CDs. Even a ladder of longer term jumbos should over time make less than a growth oriented asset allocation of stocks and bonds.
With interest rates the concern isn't an FDIC charge, it's inflation erosion. With inflation at 2% a 5% CD is a solid deal, if inflation rises to 6% and you're stuck in that CD for three more years it's not looking so good.
unfourtunetly the forbes 400 is still awaiting their first cd investor ha ha.
I’m talking about the rest of us (85%) but that was a Good one!
Slackjaw, that’s my point; if CD interest rates were accurate/correct than CDs would be a decent, respectable investment. During the 2000s’ my CD investment would be almost 2x what I got if the rates reflected the Economy. As for taxes, since I’m frugal & don’t spend/contribute that much I have no problem paying my fair share of taxes to the US Taxpayer.
This is the way I see it: A person borrows/takes money from the US taxpayer; potentially makes money on it, & then 20-40 years later gives back the depreciated value to their children & grandchildren! The Banksters taught us well.
Cd rates dont really reflect the economy..they only have to be competitive with the fed discount rate or the fed funds rate ...borrowing from the fed for a bank is like us going back to our parents for money. Its a sign of failure... Banks prefer to borrow from each other or us unless no other banks will loan them.
if i remember correctly the rate the banks borrow from the fed is the discount rate, the rate banks borrow from each other is the fed funds rate.
So the summary is cd rates only have to be competitive with the banks option of borrowing from papa fed or each other .
Last edited by mathjak107; 06-25-2010 at 01:48 PM..
CDs have been a terrible option for a number of years. As you've figured out, they barely compete with savings accounts on the market, and thats in exchange for locking your money up for months on end. You would probably be better off picking up higher rated couponed municipal bonds (atleast Ba/BB) and holding them until you want to convert to cash.
just hope they dont have a credit down grade or a rate rise if your getting out before maturity .. you wont get it all back...
most dealers have a 25,000 min on munis also so you may have to look around for one that will trade less..
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