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If there's any realistic possibility of needing to sell a CD before maturity, it would be better to use a money-market fund or other alternative instead. Brokered CDs should be purchased with the strong probability of keeping until maturity.
This conversation takes on new meaning for me as I digest the news about Federally backed money market fund and T-Bills. My thanks to those keeping it going.
I have been looking more carefully at the CD offerings available from Wells. Seems like I can do weekly maturing short-term ladders if I'm willing to deal with the Banks they're peddling
Two of the CD's I bought at Vanguard have picked up a penny, or two, per $100 in price.
I suppose my First Republic CD is now a problem for JP Morgan.
Golly, I hope the FDIC isn't reliant on the debt ceiling.
In the worst case (not receiving enough money from the banks to cover the insurance costs), the FDIC is reliant on the Treasury. That's what "full faith and credit" means.
@msf " There is a reason why I've written that I don't think there's any place to hide if the Treasury defaults. Not even banks." In the back yard if you own a shovel , the attic , or under the bed. Maybe a good reason to have a grand or two stashed somewhere. I hope this post doesn't start another run to the banks !
I would just add that you should also consider the type of account, and term length of the CD. I tend to buy shorter term CDs in my taxable account, and slightly longer term CDs in my IRA account. I also focus on a laddering system of short term CDs, so I am constantly having CDs mature and offer me options on how to reinvest my cash from CDs. Finally, you should use significant due diligence on the bank offering the CDs--I will not buy a CD from any bank that does not have a very strong health rating.
I choose to keep a larger amount of cash in my taxable account, for liquidity reasons.
@WABAC, ver wise indeed. One should be maintain a well balanced portfolio prior this debt limit deadline. We already made changes to position ourselves for the coming recession. Holding higher level of cash will help as opportunities will come in the future.
In the meantime, we reviewed our asset allocation during the two major drawdowns (2000 tech bubble and 2008 GFC) and lessons learned in those drawdowns. Think we will do okay in the worst scenario if US ending up defaulting.
Now that the debt/default crisis is over, I am starting to look at CDs again. I have some cash in MMs, because of the debt/default fiasco, that I looking to invest in higher yielding options. I have also got 2 large CDs maturing in a few weeks,and will be looking for options there. Schwab Brokerage CDs are paying 5.3%, but I think they may bump a little higher in a few days. For a retired person, looking for easy money, CDs over 5% look pretty appealing to me.
I had one CD that matured at the end of last month. I have a couple more short-term CD'sthat will mature between now and January. And there's a T-Bill in there somewhere.
I'm glad I did it. But I decided on VMFXX for the taxable cash, and USFR for the IRA cash. They seemed the most flexible if buying opportunities should arise; and I think they will. And I think we'll be happy enough over the next 1-2 years with the returns.
@dtconroe- Did you mean various bank CDs available through Schwab Brokerage, or Schwab Bank CDs, which are also available at Schwab Brokerage? As far as I know, brokeragesthemselves cannot offer CDs, at least not CDs insured by the FDIC.
Brokered CDs really are FDIC-insured CDs (if they ultimately trace back to an underlying FDIC-insured bank). More than you ever wanted to know about how this works:
Brokered CDs are CDs issued by banks via a "master CD" to deposit brokers [like Schwab Brokerage], which in turn sell interests in the master certificate to individual retail investors. Any broker/dealer that sells brokered CDs is a deposit broker.
The master CD is a negotiable instrument that represents a certain number of individual CDs, each with the same denomination. FDIC insurance attaches to the individual CDs represented in the master CD. ... Although brokered CDs may have certain features that traditional CDs do not have, it is important to remember that, as long as a banking institution issues the brokered CDs, sets all of their features, and FDIC insurance applies to them, brokered CDs are generally considered bank products, not securities. However, there are several circumstances under which a brokered CD may be considered a security. For example, if a deposit broker materially alters the terms and features of a brokered CD (e.g., offering a different interest rate than the interest rate set by the issuing depository institution), the brokered CD is arguably a different investment vehicle that could be considered a security.
@dtconroe- Did you mean various bank CDs available through Schwab Brokerage, or Schwab Bank CDs, which are also available at Schwab Brokerage? As far as I know, brokeragesthemselves cannot offer CDs, at least not CDs insured by the FDIC.
Comments
I have been looking more carefully at the CD offerings available from Wells. Seems like I can do weekly maturing short-term ladders if I'm willing to deal with the Banks they're peddling
Two of the CD's I bought at Vanguard have picked up a penny, or two, per $100 in price.
I suppose my First Republic CD is now a problem for JP Morgan.
Golly, I hope the FDIC isn't reliant on the debt ceiling.
"The FDIC is funded by its member institutions through premiums and assessments paid on deposits. And, if ever needed, the FDIC can draw on a line of credit with the U.S. Treasury."
https://www.fdic.gov/consumers/assistance/protection/depaccounts/confidence/symbol.html
The Treasury would have to come up with that cash from somewhere to lend to the FDIC.
There is a reason why I've written that I don't think there's any place to hide if the Treasury defaults. Not even banks.
In the back yard if you own a shovel , the attic , or under the bed.
Maybe a good reason to have a grand or two stashed somewhere. I hope this post doesn't start another run to the banks !
Might see some opportunities in equity funds in the near future. I made some token contributions to the dividend funds in the taxable last week.
There are still likely to be opportunities in T bills and CD's after the ball is over.
This gets me to the sleeping point.
I choose to keep a larger amount of cash in my taxable account, for liquidity reasons.
In the meantime, we reviewed our asset allocation during the two major drawdowns (2000 tech bubble and 2008 GFC) and lessons learned in those drawdowns. Think we will do okay in the worst scenario if US ending up defaulting.
I'm glad I did it. But I decided on VMFXX for the taxable cash, and USFR for the IRA cash. They seemed the most flexible if buying opportunities should arise; and I think they will. And I think we'll be happy enough over the next 1-2 years with the returns.
@dtconroe- Did you mean various bank CDs available through Schwab Brokerage, or Schwab Bank CDs, which are also available at Schwab Brokerage? As far as I know, brokerages themselves cannot offer CDs, at least not CDs insured by the FDIC.