As Fed most likely keep raising interest rate till the end of the year, maybe even into 1st quarter 2023, I don't want to lock my rates at current level. So I build my own 1~3 months CD ladder in Fidelity so my money can keep rolling into updated rates. Fidelity has very decent 1~3 months CD rates that you can't find in bank CD.
@@curtisheath8809 Last time I see, they were4-4.80. There are more in the 5% and even one for 5.25 for a year with minimum 1000 in a bank. Check bankrate!
Thanks for the summary. For most folks I would think the "best" would be the instrument that pays the most...however right now that seems to be Treasury s via the convenience of Fidelity.
When I buy CDs through Fidelity I always pay attention to the Coupon Frequency. I usually select one with a monthly payout if available even though the payout is usually slightly lower. I like the flexibility of having some money coming in over time. Just depends on your situation.
keeping it simple...with my hsa and roth cash, i bought a non callable six month cd through TD ameritrade at 2.75 in the primary market...so the key is non callable and primary market.
@@AB-xb2xs Sorry for the delayed reply...the Primary market offers stability. The Secondary market offers flexibility. Keeping things simple and choosing stability.
This may did silly but I'm not familiar with primary and secondary market. When I attempted to purchase a 6 month cd through fidelity it didn't ask if I wanted to do primary or secondary
I have been purchasing CD's through my Broker for Many Years. I like the ability to purchase more than 250K in my different Accounts (Regular IRA / 401K Roll-Over IRA / Roth) since they offer CD's from many banks. Today I purchased a 8 year CD that pays 4.4%. I have a Huge CD Ladder and really enjoy investing this way.
What is not discussed is whether the CD is callable by the bank. Your 8 year CD at 4.4% is great but can the bank call it? In other words if interest rates fall below 4.4% the bank has the option to buy you out of the CD
I have 5 CD through Schwab. Times are from 30 days to 3 months as I wait for a market opportunity. My interest rates range wildly. 1.6, 1.7, 1.05, .85, and 2.3 percent. An example of how things change quickly. Ironically, the .85 was the longest term, just bad timing on the purchase. I prefer all my funds in one place, if possible. I did get in on the I-bond before the reset though. Thanks to your show Rob, I'm smacking down that big interest on that one.
I've also been looking at CD rates...now going 4.5% one 14 month for 4.6%. Brokered CD's are a little better, maybe, through Schwab. Treasury ladders paying over 4.7%
I am not sure if that is true for fidelity. I called them twice and talked to two different representatives and both told me that the account itself is insured upto 250k even though I have invested a total of 400k in CD's. The remaining 150k is not FDIC insured. All 400k is invested through different CD's throght different banks which are FDIC insured...Does anyone received a different info than what I got from fidelity?
I got a two year brokered CD through Edward Jones at 3.3%. Not mentioned but most if not all brokered CDs are simple interest whereas bank CDs are compounded.
What I like seeing here is that I am not forced to be in a bond fund that can be dropping. Hold until maturity and you are probably ok (depends on which investment in bonds of course).
I'm not a fan of CDs in such volatile times. But if I were going to park a chunk of money in a CD I'd do a ladder in 3 or 6 month increments over a year. I'm finding 3% in "Raise Your Rate" CDs at Ally which does, in fact, automatically raise the rate when they go up.
A ladder is what I am doing. I do not know your age. If I was younger, I will continue to bet on the stock market. Actually, I am still in it, but I am trying to fence my risk. I am also looking at the T bills to park my last chunk of available cash. I am just looking at minimizing risk while keeping the inflation from eating deeper at my cash.
People who are sure they won't need to withdraw during the contract term, and who will be at least age 59.5 by the maturity date, should consider MYGA's. Higher yield in exchange for giving up some liquidity.
I just made the same choice you eluded to and bought a large amount of short term treasuries over CD's (both offered through Fidelity) to save the state tax
Navy Federal has 12 month CDs at 3%. They have longer term CDs at higher rates that you gradually add money to. If you have family members in any of the services, you can sign up.
Thanks for the video. Great comparison of the various options. One point you might make on interest rate risk goes like this... If you need the money in a year, don't buy a 2-yr CD.
I just opened two CDs with my credit union in TX. One is 12 months at 3.5, and the second is 18 months at 4.0. There is a penalty, but I do not intend to take it out since I have a well-built emergency fund, and I will work for another year. I am aiming at buying an I bond before the end of this month. I am about to retire next year (I am already FRA but decided to wait a bit). I had a stash that I needed to move in order to keep up with some if not all the inflation, and patiently waited and researched for decent deals. I moved my emergency to Capital One checking with a good rate for this time, and the rest for the CDs and the I bond. Investing anymore in the stock market at my age makes me too anxious.
Stock market is going to crash soon when dollar collapses. What are you doing with your cash? I’ve heard buying foreign money to hold protect value til needed.
Appreciate your work here Rob. Also Corporate Bonds are offering even higher rates for those people looking to get more for their money. Just be aware most will be Callable & beyond a 5 year term. Have to consider the company issuing the Bond too ( will it still be around so the risk factor there ). I inherited a Bank Of America Corporate Bond that pays 6 % every month / Not Callable / Matures in 2036 . Couldn't find anything more than Quarterly payments in todays world. I understand T-Bills are a great option though because they are No Risk.
@@nortonbros I just bought a 3 month CD from Schwab for 3.34%. The Fed says it will continue to raise a few more times by years end. I’m not usually this conservative with my money but I’m still waiting for stocks to fall further. I’m dollar cost averaging on a lot of solid cash rich companies that can withstand the inflationary time.
@@cashflow68 I’m with ya! I think we bottom out in the market around Q2 or 2024 but if daddy Powell wants to put the printer back on early. What ever that day is will be the bottom of the market
@@nortonbros I agree. It’s difficult to buy at the bottom of the market and rarely works. I used to ask my dad in the 70’s what’s a good stock to buy, he would say “the one I just sold or the one I just bought”. If interest rates keeps rising, prices will inevitably decline. Like they say, the solution to inflation, is higher prices.
A new viewer. Good show. Just wanted to point out about the costs of selling or buying a brokered CD in a secondary market and those brokerage firms would charged $1 for each $1000 for CD or any secondary T Bill or bond. No fee for new primary CD or T Bill. I learn something new from this show that Fidelity bought all CDS from new issuer banks and resale to retail customers. I thought Fidelity makes money through commissions from selling CD for those issuing banks.
Fidelity and probably all the Brokerages allow you to buy treasuries at auction, I found that eliminates the Bid/Ask premium you have to pay when buying treasuries on the secondary market, giving slightly better effective yields. You should discuss that option as well. The only downside is you have to buy on the auction date which may only be once per month for longer term treasuries.
@@robertw477 If you look at the auction schedule you can place your order after 4pm on the announcement date up to the morning of the auction date. The available treasuries appears on the auction tab. This gives you a few days to place your order.
I'm a relatively young investor that is just looking to park money in CDs from my "cash" position, in which I take the accounting view of "cash", where the initial maturity is 3 months or less. A one-year CD would not be considered "cash" by an accountant. Anyway, I have bought a number of 1 and 3 month CDs through Schwab, but for the most part I really wonder if that's been better than keeping it in the money market mutual fund. Certainly these days it is compared to 1 month CDs, and I'm a little leery about 3 month CDs as a place to store cash as the market might turn south and my cash allocation needs to shrink, so I wait until I have a pretty large buffer in my cash position before buying one of those. Some things you didn't mention: For treasuries, you cannot place market orders outside of the active trading window. That means I either place a limit order that might not get filled as the market shifts as it opens, which would potentially lose me a day of interest every day that happens on top of the day or two I need to have it out of the money market fund to be able to buy things with (and in this area Vanguard is better for letting you use a money market fund to settle transactions, but I much prefer Schwab for everything else) or I take time off of work specifically to buy the treasuries, which isn't going to happen. I definitely like some of the very short-term treasuries that are available compared to the money market fund, but it's a bit of a risk. For brokered CDs, you have to buy in multiples of $1,000. For bank CDs, the screenshots you showed all had a minimum investment of $1, and I assume you could invest any amount you wanted. Additionally, at least at Schwab, the settlement date of the CD is generally at least a week in the future of when you're able to order it, meaning that every CD you buy essentially requires me to give up a week of interest, unless I were to order it before the money is available (which I'm not sure if I can even do) and only take the money out of the money market fund on the specific day it settles (can I be selling the money market fund the same day as the CD settles, or does it need to be there in cash the day before?), which I don't want to bother with similar to not wanting to take time off work to buy treasuries - I want to do all of the money management I need to do on the weekends. I suppose if you're looking at mainly 1 year CDs that's not as large of an issue, but for me, as I constantly buy 3-month CDs whenever my allocation to cash gets to a certain point, it's a bit of an issue.
WOW!!!!! Today is Jan 2, 2023... and how things have CHANGED!!!!! The whole interest rate fixed income market is totally different than it was just a few months ago when this vid was posted... for the uncertainty and all the "doom & gloom" forcasted for this yr, I'm stashing a lot of money in CDs and or bonds for about 2 to 3 months... the whacky yield curve makes it completely idiotic to buy long term fixed income instruments... my biggest problem is that thru E-Trade, the pickins can be hard... they have US Treasuries... but sometimes the minimum offering is 1000 bonds... theat's a MILLION BUCKS!!!! But I did get a few 4.75% CDs maturing in two months, so I'm not concerned about penalties... the longer term offerings are in the 3% range, and we just need to see what the Fed is going to do.
I have had a Sallie Mae Money Market account for about 5 years. Currently at 1.5%. They have always been easy to work with. I like the fact you can write checks from the account, which I do for big ticket items. When I paid off a mortgage a couple of years ago, one phone call was all it took to transfer the funds from the MMA to my linked primary bank. I am considering a Sallie Mae 14-month no penalty CD right now.
Hey Rob, great stuff. Love CDs to protect principle. Many people down 20% on what they thought were “safe investments.” Balanced funds, wellingtons of the world etc. If you want to keep safe money safe, CDs are the place to be. Bond fund people in the last 6 months are having trouble sleeping at night. Thanks again for the great content!
If you understand what bond funds represent and your in the right bond fund for your situation, you should not be losing sleep. A bond fund is nothing but a fund of bonds. If you bought a brokerage CD and you tried to sell it today guess what you would sell it for a loss. No different than a bond fund
@@henryng191 a bond fund is definitely not the same as a CD. And no a bond fund is not the same as a bond but if your goal is to hold a specific type of bond constantly in your portfolio they work great assuming you picked the right Bond fund If holding a bond fund doesn't allow you to sleep it's definitely not the right investment for you. But I held bond funds most of my life and I never bothered me one bit. (I just changed to a 100% stocks because of my personal situation).
Not sure what I think about bond funds either, having lately lost money even on my short term government bond ETF, which SOUNDS pretty safe. (Maybe a moderate sized holding in an IRA, for diversification?) But I am becoming a fan of treasury bills and notes, at least for my taxable account. In California, exemption from state tax makes them a great bargain compared to CDs, and the yields are very close. They are easy to buy through Schwab, and to set up a ladder if I want.
Great Lesson ! I'd like to know if I could build my Bond portfolio using these instruments . Seems like I keep getting kicked and disappointed with bond funds . There is certainly more certainty with these vs funds . Especially now with interest rates up in the air .These sort of mimic Buffett's short term bond fund recommendations . I just came across your lessons and am doing a deep dive into them now , just as I'm decluttering my portfolio . Thanks again Rob . Great lessons !
I have invested in the NO Penalty CDs at SaveBetter and just a small thing that I learned...... to close a No Penalty CD (or any CD for that matter) requires a phone call to their customer service for them to close the CD and then it takes approximately 3 business days to get the money to your linked external bank account. A small inconvenience because it seems like it could be done online.
I'm also looking at what do with some cash slated for a kitchen remodel! I've got cash that has just been sitting, but the interest rates are so much more attractive right now.
It is now over two months later...Sallie Mae now has a no penalty 14 month CD through Save Better that is now 3.30%. A regular 18 month CD is available at Ally for 3.50%.
I believe you don't get any interest payments on a bank CD until maturity, whereas if it's a brokered bank CD, you get interest payments (monthly or semi-annual) before maturity.
M.Y. Safra Bank 36 mo CD 3.96% yes penalty, but if you can't leave your money in for at least a few years why bother investing it. Treasury Direct $ 10,000 I series T bond 9.62% gotta buy before 10/28/22 for that rate for the following 6 months rate.
I called the FDIC and they essentially said the savebetter sallie mae 2.7% no penalty is NOT fdic insured. because they pool funds, so it won't be in your name, if savebetter goes under. She basically said there's a similar company that just went under, and couldn't give me the name, but said "be careful"
I had a feeling, Rob is most likely getting a benefit from advertising Save Better. So he’s promoting it. If it goes under his viewers can lose all their money! Save Better is not safe. FDIC means YOU & your beneficiaries are protected! So invest at your own risk. There’s no free lunch!
Just seeing this comment today. SaveBetter uses custodial accounts, which are FDIC insured. From SaveBetter's website: "Although SaveBetter customers’ deposits are pooled in omnibus accounts, there is no impact on the eligible deposit insurance coverage you receive from the financial institution holding your savings. This is because the government entities providing federal deposit insurance - the FDIC for banks and NCUA for credit unions - permit pass-through coverage. So your money that’s pooled in a custodial account still has the coverage it would have were it held in an individual account in your name." Pooled custodial accounts are nothing new, so I think something is missing in the FDIC call you describe. I'm going to reach out to the FDIC myself later today.
Just got off the phone with a subject matter expert at the FDIC. They have heard of save better, and told me that Deposit Accounts opened through save better are in fact FDIC insured.
@@rob_bergerthey told me: “By federal law, the FDIC only insures deposits held in FDIC-insured banks. When a consumer places funds with a non-bank company (for example, SaveBetter) believing that those funds are deposited in an FDIC-insured bank, there is a risk that the non-bank company will not actually deposit the funds properly at the FDIC-insured bank on their behalf.”
Let's pick nits. One difference between a brokered and regular CDs is that a regular CD will compound over the life of the CD, resulting in a higher APY than the interest rate because of compounding. A brokered CD usually has a scheduled payout which goes to your brokerage account. Correct me if I'm wrong, but the APY which shows on a brokered CD assumes that you re-invest the interest payout at the same interest rate as the CD. Not a huge difference but it is a difference if I am correct. Another question about brokered CDs is who has the FDIC insurance? The broker bought it from an FDIC insured bank but re-sold it to you, so did the FDIC insurance transfer to you or not? I don't suppose it really matters unless both the bank and the brokerage failed.
You are correct that on standard bank CDs, interest is added to the principal and earns interest for the remainder of the term. Brokered CDs are essentially a loan to the bank with coupons paid as cash. The higher yield on brokered CDs more than compensates for the lack of compounding on shorter maturities. Both types of CDs are FDIC insured with limits based on the bank that issued them. (I had many brokered CDs during the GFC and spent many an FDIC Friday determining which high yield I was about to lose.)
I don't think it's entirely accurate to say that the brokers buy large lots of CDs from banks themselves. Because (at least at Schwab) the settlement date of the CD is some number of days in the future, I assume that Schwab is just taking orders for the CDs that the banks have made an offer to sell up to a specified number on a specific date. The broker gets a few cents for each CD someone buys, and the bank gets their CDs advertised, which is why they're called brokered CDs. You still buy it from the bank, so the FDIC insurance covers you.
Good information. Thanks for putting it together. Off topic question … what is the brand of keyboard on your desk? I am unhappy with my Apple keyboard on my iMac.
Rob - excellent video as I am looking at moving some bond fund monies to brokered CD (not callable). Looking at long term performancee on bonds vs guaranteed +4.5% (don't need the money)
Since this video is 5 months old, 10-2 Treasury yields have been in inverted since June ‘22. Why would anyone buy a 13-17 month CD? A retiree should be focusing on yields. Your best bet would be 3-6 month Treasury Bills with substantially higher yields.
aren't all bonds interest rate sensistive throughout their lives? As you hold until maturity, you'll get the coupon income and all your principal back, regardless how rates changed throughout the bond period. I don't fret about interest rate risk because of this. Just hold to maturity.
Well hey, I now discovered a new complexity in banking in the US. So went to my Fidelity account to see which CDs there were on offer and scrolling down the list, find one, look at its details and fine some new "special rule" that I wonder, "What is that about?". So "Blue Sky States". Really government? So not every CD can be purchased by residents of every state?! Care to talk on this silliness at some point? In my example, the "Keybank NA" CD isnt available in NY OH OR WA. I guess that is because Keybank maybe doesn't have a state registered presence in those states.
Some states have different requirements for offering certain products to residents of their states. Many banks will make sure they follow the rules to have them be issued in most states, and I would think that NY and OH would be big enough markets for any bank marketing things nationwide that they'd conform to the requirements there, but they've apparently decided it's too much work and just won't offer them to residents of those states. Most products I see on Schwab are available in every state, or maybe just not in some random US territories.
Morgan Stanley Preferred Savings program offers %2.15, and up to 10 withdrawals a month allowed; over 10 withdrawals $25 fee applied. $ 1000.00 minimum initial order. Any thoughts?
@@steveh6062 FDIC coverage up to $250K per person, only if it s a joint account that would add up to $500K coverage, i presume thats what they meant to tell you.
Are CD's the best way to get guaranteed income from cash reserves? I'm not comfortable with bond funds because they can go down and are not guaranteed.
Anyone who invests in a 13 month CD at 2.75% and ties their money up for a year, and would have to pay a penalty for early withdrawal, should have their head examined. Brokered CD’s don’t seem to pay much, either. I haven’t bought a CD since I was in my late teens or early 20’s, when they were paying 8% to 10% interest. That was back in the late 70’s to early 80’s. You can get an online savings account that pays a higher interest rate, is guaranteed by the FDIC up to $250,000 and you’re not tying your money up, or paying a penalty if you withdraw it early. The one I’m in now pays 3.75% APY. Two months ago, when this video was posted, it was still over 3%. Right now though, treasury bills are paying better interest rates, on much shorter terms, and you avoid paying state tax on them. Bonds, as you mentioned, are good, too, but with increasing interest rates, I don’t want to tie my money up for a year or more with a bond. CDs to me, with the rare exceptions of banks that pay a very high rate, are a big no. Another area you can invest and not tie your money up for months, is a money market fund at Fidelity. FZDXX is a fund that pays 3.621%, which works out to 3.75% APY. You have to start with $100,000 to get that account set up and get that rate, but they don’t hold you to keeping that amount of money in that account. Their default money market account pays just a little bit less than FZDXX, appx .25% less. Please let your subscribers know about the three options, mentioned above: online savings accounts, treasury bills, and that fund at Fidelity.
Thank you for the great video Rob… one question that I have always had is, what are the banks investing in with our money to help them maximize the spread and earn as much as they possibly can?
There will be $100 minimum T Bills & brokers offer these too. The higher the interest rate the more likely the minimum is elevated. At least that is what I see at TD Ameritrade - now Schwab.
In comparing to buying a $1000.00 12-month CD @ 5.15 % vs leaving $1000.00 in a saving account with 5.15% APY. Would you earn more than 5.15% with saving by letting the monthly interest from the 1000 earn monthly compound interest for 12 month? I am trying to figure out if saving this way would beat the CD rate.
Hi Rob, Excellent and thorough as always! I have been driving cash into 3 month CD’s over the last several months. As they mature, I reinvest. The latest are at 2.4%. With the latest comments from the FED, another rate increase in September is expected. And while some pundits suggest a rate drop next year who knows. Also, since I live in a tax free State (Nevada) I don’t have that issue. My question: Are you investing in longer term CD’s and Treasuries purely to guard against a rate drop? With shorter term I seem to avoid that risk. Your thoughts? And thanks again for your great tutorials!
Point taken. I was actually referencing a couple of recent articles in the WSJ. And the SF FED seems to be walking back from .75 to .50 next month. So, I take it you are going longer to hedge downside risk? Thanks again.
@@urbanart7325 Yeah, go to synchrony bank and buy a CD. I think they're up to 5% now. I bought at 4.5% but interest rates have gone up. Lock in a year and a half at that rate and forget about it.
I thought one of the advantages of brokered CDs is I can buy them in my IRA. I try to keep ~5 yrs worth of my yearly retirement withdrawl in cash like investments. Am I missing something?
How do you know when the cd matures if you decide you don't want to automatically roll it into another term? Like do i need to sell at the end of maturity or will there be something to let me know its matured and I need to sell to get my profit
Fidelity recently started Fractional CDs; I'm going to give those a try. Also, I can't help but notice your slabbed copy of ROM # 1 - that's some Frank Miller goodness! - "alternative" asset, lol?
If I am looking at investing between 1-3 years, should I be looking at high-yield CDs? And how does that compare with Treasury I-bonds? I am not very familiar with Treasury bonds though you mentioned it in the video. Not sure if those are T-bills, I-bonds, etc. Thanks!
How do I find financial institutions not pushing or being pushed by EDI requirements? Blackrock and Vanguard in particular , are acting in ways I don't want to leverage with my money.
Can you do a video on a real life of say under the fdic insured amount maybe $240K in a 1 year ladder cd, say 5.30% across the board and what the return would be every 3 months. I think a lot of us get confused with cd ladders. Ty
As Fed most likely keep raising interest rate till the end of the year, maybe even into 1st quarter 2023, I don't want to lock my rates at current level. So I build my own 1~3 months CD ladder in Fidelity so my money can keep rolling into updated rates. Fidelity has very decent 1~3 months CD rates that you can't find in bank CD.
I opened a Fidelity ladder also.
What are the rates?
@@curtisheath8809 Last time I see, they were4-4.80. There are more in the 5% and even one for 5.25 for a year with minimum 1000 in a bank. Check bankrate!
Thanks for info on the brokered angle. You have opened my eyes.
Thanks for the summary. For most folks I would think the "best" would be the instrument that pays the most...however right now that seems to be Treasury s via the convenience of Fidelity.
When I buy CDs through Fidelity I always pay attention to the Coupon Frequency. I usually select one with a monthly payout if available even though the payout is usually slightly lower. I like the flexibility of having some money coming in over time. Just depends on your situation.
keeping it simple...with my hsa and roth cash, i bought a non callable six month cd through TD ameritrade at 2.75 in the primary market...so the key is non callable and primary market.
Why only primary market and not secondary?
@@AB-xb2xs Sorry for the delayed reply...the Primary market offers stability. The Secondary market offers flexibility. Keeping things simple and choosing stability.
This may did silly but I'm not familiar with primary and secondary market. When I attempted to purchase a 6 month cd through fidelity it didn't ask if I wanted to do primary or secondary
One of the more useful and informative personal finance YT videos I've watched. Great job!
I have been purchasing CD's through my Broker for Many Years. I like the ability to purchase more than 250K in my different Accounts (Regular IRA / 401K Roll-Over IRA / Roth) since they offer CD's from many banks. Today I purchased a 8 year CD that pays 4.4%. I have a Huge CD Ladder and really enjoy investing this way.
What is not discussed is whether the CD is callable by the bank. Your 8 year CD at 4.4% is great but can the bank call it? In other words if interest rates fall below 4.4% the bank has the option to buy you out of the CD
@@JohnPaul-xi4dz I only buy non callable. I have since purchased another CD at 4.2% for 5 years.
What a big difference in 7 months. from 2.75% to 5% Now.
I have 5 CD through Schwab. Times are from 30 days to 3 months as I wait for a market opportunity. My interest rates range wildly. 1.6, 1.7, 1.05, .85, and 2.3 percent. An example of how things change quickly. Ironically, the .85 was the longest term, just bad timing on the purchase. I prefer all my funds in one place, if possible. I did get in on the I-bond before the reset though. Thanks to your show Rob, I'm smacking down that big interest on that one.
go Marcus, 4.3% for saving…
Schwab has gone up significantly here recently. I'm going to do a 6 month cd at 4.55% which is better than most right now.
I've also been looking at CD rates...now going 4.5% one 14 month for 4.6%. Brokered CD's are a little better, maybe, through Schwab. Treasury ladders paying over 4.7%
Rob I never knew Fidelity had Cds. Ty for the tip.
Fidelity charges a fee for every CD bought or sold on the secondary market. I believe that it is $1 for each CD. I enjoyed your video. Thanks.
Great content Rob! One of the nice things about brokered CDs is that you can stack FDIC protections among several banks.
I am not sure if that is true for fidelity. I called them twice and talked to two different representatives and both told me that the account itself is insured upto 250k even though I have invested a total of 400k in CD's. The remaining 150k is not FDIC insured. All 400k is invested through different CD's throght different banks which are FDIC insured...Does anyone received a different info than what I got from fidelity?
Great video, thanks Rob!
I got a two year brokered CD through Edward Jones at 3.3%. Not mentioned but most if not all brokered CDs are simple interest whereas bank CDs are compounded.
And in this context compounded is better right ?
I must run this again on slow. Maybe a couple of times. I think I have a lot to learn.
What I like seeing here is that I am not forced to be in a bond fund that can be dropping. Hold until maturity and you are probably ok (depends on which investment in bonds of course).
Like really short term Treasury Bills, such as the 4 week which is paying @ 2.09% APR currently
I'm not a fan of CDs in such volatile times. But if I were going to park a chunk of money in a CD I'd do a ladder in 3 or 6 month increments over a year. I'm finding 3% in "Raise Your Rate" CDs at Ally which does, in fact, automatically raise the rate when they go up.
A ladder is what I am doing. I do not know your age. If I was younger, I will continue to bet on the stock market. Actually, I am still in it, but I am trying to fence my risk. I am also looking at the T bills to park my last chunk of available cash. I am just looking at minimizing risk while keeping the inflation from eating deeper at my cash.
What happens when dollar collapses this summer?
@@u.s.patriot298What happens when a meteor destroys the Earth in 2 months?
People who are sure they won't need to withdraw during the contract term, and who will be at least age 59.5 by the maturity date, should consider MYGA's. Higher yield in exchange for giving up some liquidity.
LedingClub Savings offers a 2.07% PAY. so far this is the best saves rate I found. Gonna look into buying CDs and treasures. thank you!!
I just made the same choice you eluded to and bought a large amount of short term treasuries over CD's (both offered through Fidelity) to save the state tax
Thank you so much for the detailed explanation of brokered CDs and treasuries. This is so helpful.
UPDATE: Now the best no-penalty CD is paying 3.30%: www.allcards.com/go/sallie-mae-14-no-penalty-cd/yt-brokered-cd
How are you protected by FDIC with Save Better? Is the cd really in your name?
Ron, could you please verify that CD's purchased through SaveBetter are FDIC insured?
I called the FDIC this morning and they confirmed that deposits are FDIC insured (credit union accounts would be insured through NCUA)
How much is the minimum amount needed to open the brokered CD?
@@captainnitrousx1331 usually $1000 minimum
FDIC insured is worth 1.04 for every 100.00 invested in the bank. so much for that !
Got no penalty at Ally! Great 👍 Video!
Navy Federal has 12 month CDs at 3%. They have longer term CDs at higher rates that you gradually add money to. If you have family members in any of the services, you can sign up.
Thanks for the video. Great comparison of the various options. One point you might make on interest rate risk goes like this... If you need the money in a year, don't buy a 2-yr CD.
It wouldn't matter on a No Penalty CD you get ALL your money back with the interest to that point you cashed it in.
I just opened two CDs with my credit union in TX. One is 12 months at 3.5, and the second is 18 months at 4.0. There is a penalty, but I do not intend to take it out since I have a well-built emergency fund, and I will work for another year. I am aiming at buying an I bond before the end of this month. I am about to retire next year (I am already FRA but decided to wait a bit). I had a stash that I needed to move in order to keep up with some if not all the inflation, and patiently waited and researched for decent deals. I moved my emergency to Capital One checking with a good rate for this time, and the rest for the CDs and the I bond. Investing anymore in the stock market at my age makes me too anxious.
Stock market is going to crash soon when dollar collapses. What are you doing with your cash? I’ve heard buying foreign money to hold protect value til needed.
Appreciate your work here Rob. Also Corporate Bonds are offering even higher rates for those people looking to get more for their money. Just be aware most will be Callable & beyond a 5 year term. Have to consider the company issuing the Bond too ( will it still be around so the risk factor there ). I inherited a Bank Of America Corporate Bond that pays
6 % every month / Not Callable / Matures in 2036 . Couldn't find anything more than Quarterly payments in todays world. I understand T-Bills are a great option though because they are No Risk.
Thanks Rob. Educational as always. Best content on the web!!!
I went with the brokered CDs recently. I picked ones with monthly coupon frequencies vs. at maturity or semi-annually.
I did the same buying 3 months monthly CD at Schwab. Also adding to my positions on dividend payers such as PG & ABBV
Schwab 1 month from Beal bank 2.95% is a good move 😎
@@nortonbros I just bought a 3 month CD from Schwab for 3.34%. The Fed says it will continue to raise a few more times by years end. I’m not usually this conservative with my money but I’m still waiting for stocks to fall further. I’m dollar cost averaging on a lot of solid cash rich companies that can withstand the inflationary time.
@@cashflow68 I’m with ya! I think we bottom out in the market around Q2 or 2024 but if daddy Powell wants to put the printer back on early. What ever that day is will be the bottom of the market
@@nortonbros I agree. It’s difficult to buy at the bottom of the market and rarely works. I used to ask my dad in the 70’s what’s a good stock to buy, he would say “the one I just sold or the one I just bought”. If interest rates keeps rising, prices will inevitably decline. Like they say, the solution to inflation, is higher prices.
Got a 6 month broker CD with Wells Fargo at 2.5% hoping for even better rates next year
Timely video, been researching and dipping my toe into some more cash alternatives. Thanks.
A new viewer. Good show. Just wanted to point out about the costs of selling or buying a brokered CD in a secondary market and
those brokerage firms would charged $1 for each $1000 for CD
or any secondary T Bill or bond. No fee for new primary CD or T Bill.
I learn something new from this show that Fidelity bought all CDS from new issuer banks and resale to
retail customers. I thought Fidelity makes money through commissions from selling CD for those issuing banks.
Awesome video Rob, thanks for the free financial education again!
Fidelity and probably all the Brokerages allow you to buy treasuries at auction, I found that eliminates the Bid/Ask premium you have to pay when buying treasuries on the secondary market, giving slightly better effective yields. You should discuss that option as well. The only downside is you have to buy on the auction date which may only be once per month for longer term treasuries.
What happens with Fidelity if you dont buy them on that day of auction?
@@robertw477 If you look at the auction schedule you can place your order after 4pm on the announcement date up to the morning of the auction date. The available treasuries appears on the auction tab. This gives you a few days to place your order.
Buy at Treasury Direct….I bought my 9.6% I bonds and 17 week bonds that way. 17 week is at about 4.6%.
I'm a relatively young investor that is just looking to park money in CDs from my "cash" position, in which I take the accounting view of "cash", where the initial maturity is 3 months or less. A one-year CD would not be considered "cash" by an accountant. Anyway, I have bought a number of 1 and 3 month CDs through Schwab, but for the most part I really wonder if that's been better than keeping it in the money market mutual fund. Certainly these days it is compared to 1 month CDs, and I'm a little leery about 3 month CDs as a place to store cash as the market might turn south and my cash allocation needs to shrink, so I wait until I have a pretty large buffer in my cash position before buying one of those.
Some things you didn't mention:
For treasuries, you cannot place market orders outside of the active trading window. That means I either place a limit order that might not get filled as the market shifts as it opens, which would potentially lose me a day of interest every day that happens on top of the day or two I need to have it out of the money market fund to be able to buy things with (and in this area Vanguard is better for letting you use a money market fund to settle transactions, but I much prefer Schwab for everything else) or I take time off of work specifically to buy the treasuries, which isn't going to happen. I definitely like some of the very short-term treasuries that are available compared to the money market fund, but it's a bit of a risk.
For brokered CDs, you have to buy in multiples of $1,000. For bank CDs, the screenshots you showed all had a minimum investment of $1, and I assume you could invest any amount you wanted. Additionally, at least at Schwab, the settlement date of the CD is generally at least a week in the future of when you're able to order it, meaning that every CD you buy essentially requires me to give up a week of interest, unless I were to order it before the money is available (which I'm not sure if I can even do) and only take the money out of the money market fund on the specific day it settles (can I be selling the money market fund the same day as the CD settles, or does it need to be there in cash the day before?), which I don't want to bother with similar to not wanting to take time off work to buy treasuries - I want to do all of the money management I need to do on the weekends. I suppose if you're looking at mainly 1 year CDs that's not as large of an issue, but for me, as I constantly buy 3-month CDs whenever my allocation to cash gets to a certain point, it's a bit of an issue.
WOW!!!!! Today is Jan 2, 2023... and how things have CHANGED!!!!! The whole interest rate fixed income market is totally different than it was just a few months ago when this vid was posted... for the uncertainty and all the "doom & gloom" forcasted for this yr, I'm stashing a lot of money in CDs and or bonds for about 2 to 3 months... the whacky yield curve makes it completely idiotic to buy long term fixed income instruments... my biggest problem is that thru E-Trade, the pickins can be hard... they have US Treasuries... but sometimes the minimum offering is 1000 bonds... theat's a MILLION BUCKS!!!! But I did get a few 4.75% CDs maturing in two months, so I'm not concerned about penalties... the longer term offerings are in the 3% range, and we just need to see what the Fed is going to do.
1/6/23 Rockland federal credit union. 4.5% 12 month CD. 4.0% on 15 month CD
I have had a Sallie Mae Money Market account for about 5 years. Currently at 1.5%. They have always been easy to work with. I like the fact you can write checks from the account, which I do for big ticket items. When I paid off a mortgage a couple of years ago, one phone call was all it took to transfer the funds from the MMA to my linked primary bank.
I am considering a Sallie Mae 14-month no penalty CD right now.
Hey Rob, great stuff. Love CDs to protect principle. Many people down 20% on what they thought were “safe investments.” Balanced funds, wellingtons of the world etc.
If you want to keep safe money safe, CDs are the place to be. Bond fund people in the last 6 months are having trouble sleeping at night. Thanks again for the great content!
If you understand what bond funds represent and your in the right bond fund for your situation, you should not be losing sleep. A bond fund is nothing but a fund of bonds.
If you bought a brokerage CD and you tried to sell it today guess what you would sell it for a loss. No different than a bond fund
@@henryng191 a bond fund is definitely not the same as a CD.
And no a bond fund is not the same as a bond but if your goal is to hold a specific type of bond constantly in your portfolio they work great assuming you picked the right Bond fund
If holding a bond fund doesn't allow you to sleep it's definitely not the right investment for you. But I held bond funds most of my life and I never bothered me one bit. (I just changed to a 100% stocks because of my personal situation).
Not sure what I think about bond funds either, having lately lost money even on my short term government bond ETF, which SOUNDS pretty safe. (Maybe a moderate sized holding in an IRA, for diversification?) But I am becoming a fan of treasury bills and notes, at least for my taxable account. In California, exemption from state tax makes them a great bargain compared to CDs, and the yields are very close. They are easy to buy through Schwab, and to set up a ladder if I want.
Great Lesson ! I'd like to know if I could build my Bond portfolio using these instruments . Seems like I keep getting kicked and disappointed with bond funds . There is certainly more certainty with these vs funds . Especially now with interest rates up in the air .These sort of mimic Buffett's short term bond fund recommendations . I just came across your lessons and am doing a deep dive into them now , just as I'm decluttering my portfolio . Thanks again Rob . Great lessons !
Good overview Rob, thanks for sharing!
Alliant Credit Union tends to have some of the highest certificate APYs that I find.
I have invested in the NO Penalty CDs at SaveBetter and just a small thing that I learned...... to close a No Penalty CD (or any CD for that matter) requires a phone call to their customer service for them to close the CD and then it takes approximately 3 business days to get the money to your linked external bank account. A small inconvenience because it seems like it could be done online.
Are you truly FDIC insured at Save Better? If they go under, how would you get your money back?
I was able to close the CD online. No phone call needed.
thanks you I have been looking for something like this for 3 weeks.
I'm also looking at what do with some cash slated for a kitchen remodel! I've got cash that has just been sitting, but the interest rates are so much more attractive right now.
It is now over two months later...Sallie Mae now has a no penalty 14 month CD through Save Better that is now 3.30%. A regular 18 month CD is available at Ally for 3.50%.
TD AMERITRADE..bought 4 yr CD in primary market 4.45% with 4.5% yield.
I believe you don't get any interest payments on a bank CD until maturity, whereas if it's a brokered bank CD, you get interest payments (monthly or semi-annual) before maturity.
M.Y. Safra Bank 36 mo CD 3.96% yes penalty, but if you can't leave your money in for at least a few years why bother investing it. Treasury Direct $ 10,000 I series T bond 9.62% gotta buy before 10/28/22 for that rate for the following 6 months rate.
Good info to have -especially in today's market.
Great topic Rob, and you did a great job with it!
I called the FDIC and they essentially said the savebetter sallie mae 2.7% no penalty is NOT fdic insured. because they pool funds, so it won't be in your name, if savebetter goes under. She basically said there's a similar company that just went under, and couldn't give me the name, but said "be careful"
I had a feeling, Rob is most likely getting a benefit from advertising Save Better. So he’s promoting it. If it goes under his viewers can lose all their money! Save Better is not safe. FDIC means YOU & your beneficiaries are protected! So invest at your own risk. There’s no free lunch!
Just seeing this comment today. SaveBetter uses custodial accounts, which are FDIC insured. From SaveBetter's website: "Although SaveBetter customers’ deposits are pooled in omnibus accounts, there is no impact on the eligible deposit insurance coverage you receive from the financial institution holding your savings. This is because the government entities providing federal deposit insurance - the FDIC for banks and NCUA for credit unions - permit pass-through coverage. So your money that’s pooled in a custodial account still has the coverage it would have were it held in an individual account in your name." Pooled custodial accounts are nothing new, so I think something is missing in the FDIC call you describe. I'm going to reach out to the FDIC myself later today.
Just got off the phone with a subject matter expert at the FDIC. They have heard of save better, and told me that Deposit Accounts opened through save better are in fact FDIC insured.
@@rob_berger thanks, Rob
@@rob_bergerthey told me: “By federal law, the FDIC only insures deposits held in FDIC-insured banks. When a consumer places funds with a non-bank company (for example, SaveBetter) believing that those funds are deposited in an FDIC-insured bank, there is a risk that the non-bank company will not actually deposit the funds properly at the FDIC-insured bank on their behalf.”
Thank you Rob this was very helpful!
Great and detailed review, Rob! Very useful to many of us. Thanks 🙏
Thanks for great and timely information as always!
Let's pick nits. One difference between a brokered and regular CDs is that a regular CD will compound over the life of the CD, resulting in a higher APY than the interest rate because of compounding. A brokered CD usually has a scheduled payout which goes to your brokerage account. Correct me if I'm wrong, but the APY which shows on a brokered CD assumes that you re-invest the interest payout at the same interest rate as the CD. Not a huge difference but it is a difference if I am correct.
Another question about brokered CDs is who has the FDIC insurance? The broker bought it from an FDIC insured bank but re-sold it to you, so did the FDIC insurance transfer to you or not? I don't suppose it really matters unless both the bank and the brokerage failed.
You are correct that on standard bank CDs, interest is added to the principal and earns interest for the remainder of the term. Brokered CDs are essentially a loan to the bank with coupons paid as cash. The higher yield on brokered CDs more than compensates for the lack of compounding on shorter maturities.
Both types of CDs are FDIC insured with limits based on the bank that issued them. (I had many brokered CDs during the GFC and spent many an FDIC Friday determining which high yield I was about to lose.)
I don't think it's entirely accurate to say that the brokers buy large lots of CDs from banks themselves. Because (at least at Schwab) the settlement date of the CD is some number of days in the future, I assume that Schwab is just taking orders for the CDs that the banks have made an offer to sell up to a specified number on a specific date. The broker gets a few cents for each CD someone buys, and the bank gets their CDs advertised, which is why they're called brokered CDs. You still buy it from the bank, so the FDIC insurance covers you.
So at the end what is your ranking? And please include us notes, 1 year whatever the name, because the yields are robust above 3% right now
Great video and very helpful. Plus you have ROM #1 which is a great investment of its own!
Great information. Please do a video on MYGAs, since they are above 5% these days!
Good information. Thanks for putting it together. Off topic question … what is the brand of keyboard on your desk? I am unhappy with my Apple keyboard on my iMac.
Rob - excellent video as I am looking at moving some bond fund monies to brokered CD (not callable). Looking at long term performancee on bonds vs guaranteed +4.5% (don't need the money)
Since this video is 5 months old, 10-2 Treasury yields have been in inverted since June ‘22. Why would anyone buy a 13-17 month CD? A retiree should be focusing on yields. Your best bet would be 3-6 month Treasury Bills with substantially higher yields.
Treasury Bills also have a tax advantage (no state or local taxes)
aren't all bonds interest rate sensistive throughout their lives? As you hold until maturity, you'll get the coupon income and all your principal back, regardless how rates changed throughout the bond period. I don't fret about interest rate risk because of this. Just hold to maturity.
Excellent presentation
Excellent information…excellent presentation…thank you 🙏
Well hey, I now discovered a new complexity in banking in the US. So went to my Fidelity account to see which CDs there were on offer and scrolling down the list, find one, look at its details and fine some new "special rule" that I wonder, "What is that about?". So "Blue Sky States". Really government? So not every CD can be purchased by residents of every state?! Care to talk on this silliness at some point?
In my example, the "Keybank NA" CD isnt available in NY OH OR WA. I guess that is because Keybank maybe doesn't have a state registered presence in those states.
Some states have different requirements for offering certain products to residents of their states. Many banks will make sure they follow the rules to have them be issued in most states, and I would think that NY and OH would be big enough markets for any bank marketing things nationwide that they'd conform to the requirements there, but they've apparently decided it's too much work and just won't offer them to residents of those states. Most products I see on Schwab are available in every state, or maybe just not in some random US territories.
How would these choices compare to a money market fund? I mean, beside the lack of FDIC...
Morgan Stanley Preferred Savings program offers %2.15, and up to 10 withdrawals a month allowed; over 10 withdrawals $25 fee applied. $ 1000.00 minimum initial order. Any thoughts?
They are also saying that you are covered by FDIC for up to $500,000. How do does that work?
@@steveh6062 FDIC coverage up to $250K per person, only if it s a joint account that would add up to $500K coverage, i presume thats what they meant to tell you.
Are CD's the best way to get guaranteed income from cash reserves? I'm not comfortable with bond funds because they can go down and are not guaranteed.
Man, when are rates going up on CDs?? I expected better than this. I’m staying in savings at 2% at Wealthfront til CD rates go up.
hi Rob, for brokered CD, how do we choose the 'right' bank, with everything else being equal? is there a rating system? tia
Anyone who invests in a 13 month CD at 2.75% and ties their money up for a year, and would have to pay a penalty for early withdrawal, should have their head examined. Brokered CD’s don’t seem to pay much, either. I haven’t bought a CD since I was in my late teens or early 20’s, when they were paying 8% to 10% interest. That was back in the late 70’s to early 80’s.
You can get an online savings account that pays a higher interest rate, is guaranteed by the FDIC up to $250,000 and you’re not tying your money up, or paying a penalty if you withdraw it early. The one I’m in now pays 3.75% APY. Two months ago, when this video was posted, it was still over 3%.
Right now though, treasury bills are paying better interest rates, on much shorter terms, and you avoid paying state tax on them. Bonds, as you mentioned, are good, too, but with increasing interest rates, I don’t want to tie my money up for a year or more with a bond.
CDs to me, with the rare exceptions of banks that pay a very high rate, are a big no.
Another area you can invest and not tie your money up for months, is a money market fund at Fidelity. FZDXX is a fund that pays 3.621%, which works out to 3.75% APY. You have to start with $100,000 to get that account set up and get that rate, but they don’t hold you to keeping that amount of money in that account. Their default money market account pays just a little bit less than FZDXX, appx .25% less.
Please let your subscribers know about the three options, mentioned above: online savings accounts, treasury bills, and that fund at Fidelity.
Can you put out informational video on I bonds they dont seem to be very clear on how that all works with gifting ect.
thanks
CD’s might be easier for inexperienced buyers. T bills have better rates and higher limits to buy.
Thank you for the great video Rob… one question that I have always had is, what are the banks investing in with our money to help them maximize the spread and earn as much as they possibly can?
Mortgages, car loans, personal lines of credit, credit cards etc.
You could mention that when buying treasuries from Fidelity, there is a minimum number and amount to consider. Sometimes that is rather large
There will be $100 minimum T Bills & brokers offer these too. The higher the interest rate the more likely the minimum is elevated. At least that is what I see at TD Ameritrade - now Schwab.
What happens to CD’s & Treasury bonds when dollar collapses this summer?
12 month brokered CD at 4.7% currently.
In comparing to buying a $1000.00 12-month CD @ 5.15 % vs leaving $1000.00 in a saving account with 5.15% APY. Would you earn more than 5.15% with saving by letting the monthly interest from the 1000 earn monthly compound interest for 12 month? I am trying to figure out if saving this way would beat the CD rate.
CIT 3.75 % for 13 months
Hi Rob, Excellent and thorough as always!
I have been driving cash into 3 month CD’s over the last several months. As they mature, I reinvest. The latest are at 2.4%. With the latest comments from the FED, another rate increase in September is expected. And while some pundits suggest a rate drop next year who knows. Also, since I live in a tax free State (Nevada) I don’t have that issue.
My question: Are you investing in longer term CD’s and Treasuries purely to guard against a rate drop? With shorter term I seem to avoid that risk. Your thoughts?
And thanks again for your great tutorials!
Those pundits keep guessing on CNBC. Whoever appears right they call that person a wizard and forget all the others who say the opposite.
Point taken. I was actually referencing a couple of recent articles in the WSJ. And the SF FED seems to be walking back from .75 to .50 next month. So, I take it you are going longer to hedge downside risk? Thanks again.
You can get 4.6% now. We're still losing money considering inflation though.
@@wthomas5697 any suggestions? I do not have the skill set to bet against the market
@@urbanart7325 Yeah, go to synchrony bank and buy a CD. I think they're up to 5% now. I bought at 4.5% but interest rates have gone up. Lock in a year and a half at that rate and forget about it.
Can you also talk about Agency Bond? Very good yield and high quality. Do not know any negative issues
Ally has a no penalty CDs 11 month for 4.25%. I got the CD a few months ago for 4.75%
I thought one of the advantages of brokered CDs is I can buy them in my IRA. I try to keep ~5 yrs worth of my yearly retirement withdrawl in cash like investments. Am I missing something?
How do you know when the cd matures if you decide you don't want to automatically roll it into another term? Like do i need to sell at the end of maturity or will there be something to let me know its matured and I need to sell to get my profit
Thank you so much for sharing your research and knowledge!
Track or the CD can be called, but you will not be called, and then your high CD rate is lost.
Fidelity recently started Fractional CDs; I'm going to give those a try. Also, I can't help but notice your slabbed copy of ROM # 1 - that's some Frank Miller goodness! - "alternative" asset, lol?
Love the video, good job!
Fidelity 12 month CD ladder paying 5.3%
Citibank, 1.5% 12 mos no penalty. First Republic Bank, 2.75% 12 mos early withdrawal penalty.
Not a CD but personal capital is offering 2.01% APY on their savings
And 2.15% if you are an advisory client.
@@rob_berger yes sir
I serious considered Personal Capital but their advisor whated to buy 120 stocks for my portfolio. I want low cost index funds!
Wait, was there no mention of brokered CD's paying simple interest vs. bank CD's paying compound interest?
I have 14 stocks 4 CDs 2 bonds and 3 etfs
If I am looking at investing between 1-3 years, should I be looking at high-yield CDs? And how does that compare with Treasury I-bonds? I am not very familiar with Treasury bonds though you mentioned it in the video. Not sure if those are T-bills, I-bonds, etc. Thanks!
How do I find financial institutions not pushing or being pushed by EDI requirements? Blackrock and Vanguard in particular , are acting in ways I don't want to leverage with my money.
I have all three.
Can you do a video on a real life of say under the fdic insured amount maybe $240K in a 1 year ladder cd, say 5.30% across the board and what the return would be every 3 months. I think a lot of us get confused with cd ladders. Ty