Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
OldJoe:"Absolutely. Lots of stuff to choose from- whatever works best for you. At 84, with wife not into financial stuff, I'm keeping it simple. Just trying to maintain a little income to offset inflation (at least partially). About half in CDs/Treasuries, half in MMKT. Income (from SS & pensions) exceeds expenses. Works for us."
The importance of maintaining a "simple" portfolio for my wife, (both of us are older and retired), is a factor that may not be important for other investors. My wife understands CDs, even brokerage CDs, and MMs, but not much else. I consult with her in detail about CDs maturing, renewal options, rate of return, etc. and she offers her input before the purchase. She does not understand bond oefs, so I quit attempting to talk to her about those investments in the past. At the age of my wife and me, I don't have the luxury of time, to overcome significant portfolio losses, so we are both embracing the relative simplicity of CD investing. If CD rates start falling anytime soon, the ability to do that may not be as feasible.
@dtconroe: great story about your wife's level of expertise. It's a good thing you didn't try to explain bond CEFs, their yields, discounts, etc. (LOL!)
I chose to reinvest CD money, from recent maturing CDs, into several new CDs. I was able to purchase several new CDs for 5.3% rates. That may become more challenging in the future, if the FEDs do not choose to raise rates at their next meeting.
Old_Joe, 2 of them were 6 month CDs, and 1 of them was a 9 month CD. CDs maturing in 2025 were paying less than 5.3%. If the FEDs do raise rates 2 more times this year, there may be an opportunity to pick up longer term CDs with a little higher rates, but I am not counting on it.
@dtconroe- Could you advise time to maturity on those? Can't find anything on Schwab better than 5% going out to 2025.
Thanks- OJ
I just checked CD rates at Schwab. They do offer a 18 month CD, that matures in January 2025, that pays 5.2%. It is offered by Leader Bank, which is an A+rated bank, paying semi-annually. That seems pretty attractive to me for anyone wanting something maturing in 2025. 2 year CDs pay 5% from several banks.
@dtconroe- Hey, thanks much for your follow-up. I'll be watching closely to see if the Fed does in fact raise rates again soon... if they do, that might up the rates a bit.
@dtconroe- Hey, thanks much for your follow-up. I'll be watching closely to see if the Fed does in fact raise rates again soon... if they do, that might up the rates a bit.
OJ
Projecting what the FEDs will do next, is a complex aspect of CD investing. I will be pleasantly surprised if shorter term rates stay comfortably above 5% much longer. I am interested in longer term CDs and "hope" they settle closer to 5% than they are now, but suspect it will be in the mid to high 4% range for 2 to 3 year CDs. If I am accurate, that will present some challenges, for at least me, in my CD renewal decisions.
@dtconroe, @Old_Joe, in your guys opinions, how much more risky is a corporate bond issued from a bank with a A+ rating? Without a lot of experience it sounds pretty safe to me. Schwab shows the Bank of Montreal giving 6% on a 2 year bond. Yes, callable, but don't you still get that interest up to the call date? Worst that can happen is you reinvest the principle in another vehicle.
I'm tempted by this 2 year at 6% with a pretty safe bank. Is there something else I should be considering?
@MikeM- Hi there Mike- For a U.S. bank the main difference would be FDIC coverage for a CD vs the lack of coverage for a bond. I'm uncertain as to insurance for Canadian bank deposits, but it would likely be the same for a Canadian bank bond.
Given that the financial situation in banking can sometimes be very volatile (look at what just happened to First Republic here in the U.S.), personally I wouldn't be interested in bank bonds, especially with the world now facing an uncertain financial situation because of Central Banks trying to dial down inflation.
WABAC: "Looking forward to getting money out of short-term CD's. I tried it. Didn't like it. Will stick to money markets and floating rate T-Bills." Stillers: "Um, yeah, that's the "given." • Um, yeah, what's "the given?"
Stillers: Only invest money in CDs that you fully plan to hold there until maturity." • This, your response to WABAC, obviously suggests that his comment somehow involves holding to maturity.
Your response to WABAC focuses on holding to maturity. Nowhere does he mention that. Q.E.D.
Say WHAT?
You're sadly grasping as discrediting straws for no apparent reason other than what appears to be YOUR inherent bias against me/what I posted.
It's sad to see you stoop to that level. You used to be much better than that.
Again, my comment was general in nature. YOU are trying to make it poster-specific for some unknown reason other than to troll and discredit me. I don't get it.
And so freaking what if it WAS poster-specific? BTW, that's a serious question.
What difference would that have made other than I misunderstood what the poster did/didn't do? Again, serious question.
My statement:
Um, yeah, that's the "given." Only invest money in CDs that you fully plan to hold there until maturity.
is still accurate, useful and an actionable.
Especially for the level of fixed income expertise shown by posters on this thread. I've made a LOT of free money over the years buying the mistakes of unlearned CD investors on the Secondary Issues market.
@MikeM, many corporations offer retail corporate notes ($1,000 denominations) with slightly higher rates. Some offer them directly & even offer check writing. But there is no FDIC protection, & in case of trouble, you become a general creditor in bankruptcy court. So, stick with high-quality companies & use this as a supplemental program. Avoid those from low-quality co with juicy rates.
@dtconroe, @Old_Joe, in your guys opinions, how much more risky is a corporate bond issued from a bank with a A+ rating? Without a lot of experience it sounds pretty safe to me. Schwab shows the Bank of Montreal giving 6% on a 2 year bond. Yes, callable, but don't you still get that interest up to the call date? Worst that can happen is you reinvest the principle in another vehicle.
I'm tempted by this 2 year at 6% with a pretty safe bank. Is there something else I should be considering?
MikeM, I have never bought, or researched buying, a corporate bond from a highly rated bank. So, I am going to pass on providing my opinion on the topic. I will be interested in hearing what other posters might have to say about your question.
Corporate note basics: There are three kinds of risk: interest rate, liquidity and default. It would be wise for prospective investors to learn all about each of them BEFORE buying a corporate note.
Thanks guys for you input on buying corporate bonds vs CD's or Treasuries. I guess it comes down to, is the extra % you can get with longer duration worth the additional risk? The answer can be different for everyone I suppose.
At least one reputable news source thinks that it is almost certain the Feds will raise rates in July, but less certain about a second hike. Most of the articles I have read thinks the Fed rates will be around 5.6% by the end of the calendar year.
Comments
The importance of maintaining a "simple" portfolio for my wife, (both of us are older and retired), is a factor that may not be important for other investors. My wife understands CDs, even brokerage CDs, and MMs, but not much else. I consult with her in detail about CDs maturing, renewal options, rate of return, etc. and she offers her input before the purchase. She does not understand bond oefs, so I quit attempting to talk to her about those investments in the past. At the age of my wife and me, I don't have the luxury of time, to overcome significant portfolio losses, so we are both embracing the relative simplicity of CD investing. If CD rates start falling anytime soon, the ability to do that may not be as feasible.
Thanks- OJ
OJ
I'm tempted by this 2 year at 6% with a pretty safe bank. Is there something else I should be considering?
Given that the financial situation in banking can sometimes be very volatile (look at what just happened to First Republic here in the U.S.), personally I wouldn't be interested in bank bonds, especially with the world now facing an uncertain financial situation because of Central Banks trying to dial down inflation.
You're sadly grasping as discrediting straws for no apparent reason other than what appears to be YOUR inherent bias against me/what I posted.
It's sad to see you stoop to that level. You used to be much better than that.
Again, my comment was general in nature. YOU are trying to make it poster-specific for some unknown reason other than to troll and discredit me. I don't get it.
And so freaking what if it WAS poster-specific? BTW, that's a serious question.
What difference would that have made other than I misunderstood what the poster did/didn't do? Again, serious question.
My statement:
Um, yeah, that's the "given." Only invest money in CDs that you fully plan to hold there until maturity.
is still accurate, useful and an actionable.
Especially for the level of fixed income expertise shown by posters on this thread. I've made a LOT of free money over the years buying the mistakes of unlearned CD investors on the Secondary Issues market.
https://www.fool.com/the-ascent/banks/articles/could-cd-rates-hit-6-in-july/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article
ES&D
At least one reputable news source thinks that it is almost certain the Feds will raise rates in July, but less certain about a second hike. Most of the articles I have read thinks the Fed rates will be around 5.6% by the end of the calendar year.