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.
In your first post today, you used the words "callable" and "non-callable" to mean the opposite of what they are commonly used for in the CD / bond land. Seems like everyone understood what you are trying to convey but it made your post a difficult read. In your future posts about the subject, please consider following convention.
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This AM I received a notification that my JPM CD got called and will be cashed out on Jan 2. Note that I am not a strict CD investor - I eat what I get fed. I will be transferring the proceeds (via SGOV) to Fidelity to shop for a 10 yr Agency (likely callable too).
I also have a big Treasury Bill maturing in a couple of weeks at Fidelity (taxable). Likely goes into a MM fund to buy a Treasury Bond or a Treasury Bond fund to make some Duration bet and hope for negative correlation between Treasury bonds and equities. I could take some credit risk but with enough equity exposure, I will need attention when it is at a premium.
The above is mostly to help me to think out loud and may not be useful info to anyone else.
Thanks msf! I have a CD in my IRA account maturing in a few days. I am tempted to reinvest it in 2 year callable CD, treating it like a 6 month noncallable CD. If it is called, I think I will still be able to get a 4% replacement callable CD, and if it is not called then I am fine with that callable rate for the length of the CD.
Regarding MMs, I am expecting all categories of MMs to fall below 4% in 2025--I will continue holding MMs but may reduce the amount I will keep in them.
In your first post today, you used the words "callable" and "non-callable" to mean the opposite of what they are commonly used for in the CD / bond land. Seems like everyone understood what you are trying to convey but it made your post a difficult read. In your future posts about the subject, please consider following convention.
********
This AM I received a notification that my JPM CD got called and will be cashed out on Jan 2. Note that I am not a strict CD investor - I eat what I get fed. I will be transferring the proceeds (via SGOV) to Fidelity to shop for a 10 yr Agency (likely callable too).
I also have a big Treasury Bill maturing in a couple of weeks at Fidelity (taxable). Likely goes into a MM fund to buy a Treasury Bond or a Treasury Bond fund to make some Duration bet and hope for negative correlation between Treasury bonds and equities. I could take some credit risk but with enough equity exposure, I will need attention when it is at a premium.
The above is mostly to help me to think out loud and may not be useful info to anyone else.
Sorry for the confusion. Hopefully, the wording in my previous posts is now correct.
People may not have noticed that muni MMFs have been soaring of late, especially NY. Schwab's $1M min version, SNYXX, has a 7 day yield of 3.49% (APY 3.56%), its retail version, SWYXX has a 3.34% yield (APY 3.40%), and Fidelity's $25K min version FSNXX is at 3.28% (3.33% APY). That 3.3% is worth about 4.8% APY in a CD for someone in NYC in the 22% tax bracket. And its yield is rising.
I follow the SIFMA Municipal Swap Index Yield, which is calculated and published Wednesday afternoons. Because of the holiday, that did not occur today, but will tomorrow. The yield on muni money market funds follow this yield. Here is the past 5 weeks and as you can see, the yield is all over the place. For reasons that I do not understand, the line on the chart has been serpentine for as long as I have been watching it, which has been a few years.
DT: FD, I get your position. You are not a CD investor, you will never be a CD investor, and you will continue your trading approach that does not include CDs, which requires liquidity in your holdings. My original post was directed toward existing CD investors, deciding what those particular investors will do with their maturing CDs, not directed toward investors who will never hold CDs. If you want to "convert" the rest of us CD sinners, you will do it without restraint on this thread.
I'm not trying to convert or influence anyone. I'm stating generic comments. I don't know anyone that invests only in 100% safe CDs and treasuries, and over the years I discussed investments with many people. I also don't like callable CDs and now have to find a new solution. This is not a judgement, just an observation.
I switched to only/mostly bond funds because I could generate more performance than allocation funds with much lower risk. To the questions, what would you if...? My approach has been tested in a recession, high inflation, and very quick rising rates, and it went well. Why change it? I want to control my portfolio at all times. At anytime I can own MM,CDs, Treasuries if I want, but they have to be the best idea I have in that moment based on market conditions. It already did. From 01/2022 to early 11/2020 I was at 99+% MM, except very short (hours-days) several trades.
You should do what works for you. Good luck in the future. I just don't believe we should stay on a narrow discussion. Annuities brought up, and I believe in low-volatility bond funds that might interest some posters.
I made a lengthy post this morning regarding callable CDs. If anyone is interested in responding to that, I would appreciate it.
I've had a CD ladder for about 12-13 years. I am 100% against callable CDs. They just don't fit our strategy as callable CDs beg for constant maintenance due to their inherent duration uncertainties.
I have suggested the following strategy to you a few times over the past year or so but you always seem to reject it. I'll try it one more time:
Buy 5-yr, CP CDs at the highest rate you can get and be happy.
Currently you can BUY 5-yr, CP, Fido, Secondary Issue CDs with Effective Yields (after discount) of just under 4.3%.
Had you followed my suggestion over a year ago, you would now have a 4-5-yr, CP CD ladder making over 5%, you would NOT be dealing with constant maintenance of your fixed income portfolio, and you would very likely have more income over that 5-yr period than the option you chose. (You got maybe 5.5% for one year, but now you're likely to get, on average, under 4% for the next 4 years, while I'm getting over 5% for the entire, same 5-years period)
You may not of course. You may have a little less.
BUT, you would have saved all the time and angst that was effectively wasted on fixed income portfolio maintenance. And that time is critical to us for (1) enjoying life and (2) spending it more productively on the portion of our portfolio that really matters, our stock sleeve.
I appreciate all the many, and varied, responses to my queries. I started the thread, to see how current CD investors were choosing to invest CDs that have been reaching maturity recently. I received many great and varied responses to that query, and I really appreciate the time posters took to offer their responses. Best wishes on your investing decisions and have a happy new year!
As a follow up on annuities, I excerpted the following from YBB's Personal Finance Blog:
ANNUITIES from insurance companies may anchor parts of the income stream. Types range from basic single premium immediate annuities (SPIAs) to fancy with guaranteed minimum withdrawal benefits (GMWB). Annuities with many bells & whistles are expensive, more profitable for the insurance companies & more lucrative to the selling agents. Many brokers & insurance agents push annuities because these have the highest commissions among the products they sell. Some annuity prospectuses may run 100-200 pages.
That is from an article on "Portfolio Income & Withdrawals" that I published in a local e-paper this week (the full weekly issue isn't out yet, may be later today). It may also be of interest to others here. https://ybbpersonalfinance.proboards.com/post/1795/thread
I failed to mention the option of using Credit Union Share Certificates for you CD money/investments that are maturing. They are "almost" identical to CDs regarding deposit protection coverage, varying terms, and interest rate offers. I have a local Credit Union, that is highly rated, and pays 4.5% for a one year Share Certificate (compared to 4% from my local bank), but its early withdrawal fee is 6 months of interest (compared to 3 months interest from my local bank). I currently have some CDs maturing from both my Schwab Brokerage accounts (some taxable some IRA), and my local Bank. I am considering moving some of my maturing CDs from Schwab to a local Credit Union. I am not a big fan of Brokerage CDs compared to local banks and credit unions, because of differences in early withdrawal penalties/fees.
All true, which is why one is usually better off sticking with vanilla annuities. However, page count is a somewhat misleading metric.
Fixed annuity contracts are self-contained. Unlike mutual fund documentation, they are not broken into multiple parts: summary prospectus (outline), statutory prospectus (broad description of operation), and statement of additional information (legalize and structural info).
Add all those mutual fund pages together, and you might be at "just" 35 pages (Bruce fund BRUFX statutory prospectus + SAI), at 135 pages (VFIAX - 10 p. summary, 57 p. statutory, 78 p. SAI), or even find a humongous 575 pages (PIMIX - 5 p. summary, 142 p. statutory, 428 p. SAI).
Read a good bitcoin ETF prospectus lately? Those seem to run around 150 pages, with risk factors alone taking up scores of pages.
I pulled out an old SPDA contract I had years ago. Plain vanilla. Six pages on how the annuity could be annuitized plus a two page summary up front covering how the amount invested would grow (fixed rate) year by year and how much it would be worth annually including penalty if I closed it early. That's all.
Many if not most annuity contracts are complicated. But they don't have to be if all you're looking for is a fixed rate investment comparable to a CD. Things get at least a little more complicated if you're looking for an income stream (see, e.g. Social Security). And variable annuities? Now you're going up to potentially scores of pages for each fund offered inside the VA.
Regarding annuities, I had a bad experience in the 1980s, when my company retirement program was negatively impacted by bankruptcy of a major annuity provider--the Baldwin Company. The company retirement was frozen for a few months until the Baldwin bankruptcy eventually got resolved, and my company retirement plan was made whole again. My company changed its retirement plan away from Annuities, toward a different set of holdings tied to mutual fund holdings managed by Merrill Lynch.
Thanks msf! I have a CD in my IRA account maturing in a few days. I am tempted to reinvest it in 2 year callable CD, treating it like a 6 month noncallable CD. If it is called, I think I will still be able to get a 4% replacement callable CD, and if it is not called then I am fine with that callable rate for the length of the CD.
Regarding MMs, I am expecting all categories of MMs to fall below 4% in 2025--I will continue holding MMs but may reduce the amount I will keep in them.
@dtconroe. a very prudent decision for someone not into risk/drawdown and who is not a trader. Regarding CLOs, what is conveniently not mentioned is like most everything else in Bondland they melted down too during the Covid meltdown. Investment grade CLOs from AAA to BBB had drawdowns from 10% to 30% while below investment grade drawdowns were 40% to 45%. As recently as 2022, while investment grade CLOs eked out a small gain (JAAA) of under 1% below investment grade lost money. The longest tenured bond fund primarily into CLOs ( an interval fund) lost money 4 years since its 2014 inception. In 2020 it had a multi week drawdown of 30%. As recently as 2022 this CLO fund lost 4.48%. 2023 and 2024 just happened to be “the right place right time” for CLOs. I hold slightly under 50% in CLOs but I am more than cognizant of the risks. A substitute for cash they certainly aren’t.
Thanks msf! I have a CD in my IRA account maturing in a few days. I am tempted to reinvest it in 2 year callable CD, treating it like a 6 month noncallable CD. If it is called, I think I will still be able to get a 4% replacement callable CD, and if it is not called then I am fine with that callable rate for the length of the CD.
Regarding MMs, I am expecting all categories of MMs to fall below 4% in 2025--I will continue holding MMs but may reduce the amount I will keep in them.
@dtconroe. a very prudent decision for someone not into risk/drawdown and who is not a trader. Regarding CLOs, what is conveniently not mentioned is like most everything else in Bondland they melted down too during the Covid meltdown. Investment grade CLOs from AAA to BBB had drawdowns from 10% to 30% while below investment grade drawdowns were 40% to 45%. As recently as 2022, while investment grade CLOs eked out a small gain (JAAA) of under 1% below investment grade lost money. The longest tenured bond fund primarily into CLOs ( an interval fund) lost money 4 years since its 2014 inception. In 2020 had a multi week drawdown of 30%. 2023 and 2024 just happened to be “the right place right time” for CLOs. I hold slightly under 50% in CLOs but I am more than cognizant of the risks. A substitute for cash they certainly aren’t.
Thanks for your comment Junkster. These threads invite a wide array of responses, from posters with a wide array of investing preferences, and a wide array of personal financial circumstances that are the background to their financial decision making. I try to sort through the posted information, to see how much applicability it has to my personal investing criteria. This thread has led to a large variety of posters and posted information. I don't have any interest in CLOs, and I "currently" don't have any interest returning to the bond oef world of trading and momentum based decision making. I don't care for annuities and unique risks/rewards. CDs have been paying a very nice 5+% return for the last year, but that seems to be on the decline. I have never used callable CDs, but they do offer a better interest rate than noncallable CDs, for about 6 months and possibly longer. I am inclined to invest some maturing CD cash into a local Credit Union Share Certificate that pays about a half percent more than I can get at Schwab or my local bank. Different strokes for different folks, and their varied financial strategies and circumstances.
Most of us know how FDIC insurance works and troubled banks are resolved but most of us have no understanding of how deposit insurance works at credit union level. Please educate us with examples of how depositors of CUs were protected (or not protected) when CUs got into trouble.
Most of us know how FDIC insurance works and troubled banks are resolved but most of us have no understanding of how deposit insurance works at credit union level. Please educate us with examples of how depositors of CUs were protected (or not protected) when CUs got into trouble.
See excerpt below from a Google Search on Credit Union "Share Certificates";
A credit union share certificate is a type of savings account that offers a fixed interest rate for a set period of time: How it works You deposit money into a share certificate for a set term, usually between 3 months and 5 years. In exchange, you earn a higher interest rate, called a dividend, than a regular savings account. The longer the term, the higher the dividend. Benefits Share certificates are a good option if you want to earn interest on money you plan to use in the future. They can be a safer investment than stocks or mutual funds. Risks You'll incur penalties if you withdraw money before the term ends. Insurance Share certificates are federally insured by the National Credit Union Administration (NCUA) for up to $250,000 per depositor, per ownership category, per institution. This is similar to the coverage offered by the Federal Deposit Insurance Corporation (FDIC) for banks. Comparison to certificates of deposit (CDs) Share certificates are similar to CDs, but are offered by credit unions instead of banks. The main difference is the name.
I shall wait for @msf or YBB to reply to my post. I know it is an imposition on them because neither of them is seeking to invest in CU deposits but their reply would be a public service (as was my post - there are plenty of fish for me without looking at CUs).
The Federal National Credit Union Administration (NCUA, 1934- ) insures deposits at credit unions. These are nonprofit, smaller and simpler in functions and operations than banks, have some corporate, institutional or organizational connections, but their membership requirements can be met easily. The NCUA deposit coverage parallels that by the FDIC in most respects and that may be by design as many consumers use or treat credit unions and banks almost interchangeably. Some credit unions may be privately insured by the industry owned ASI.
What is going on? Over the years, I have seen some meaningful posts from you and I am surprised you are seriously considering a CU term deposit of any meaningful duration with the level of superficial information you shared as a reply to my post. (I plan to delete this para after you read.)
I shall wait for @msf or YBB to reply to my post. I know it is an imposition on them because neither of them is seeking to invest in CU deposits but their reply would be a public service (as was my post).
Sorry you are disappointed with the information I sent. I am not going to spend extensive time educating posters about various investment options, but Credit Unions have been around for many many years. I have had Credit Union accounts at numerous credit unions, and I actually set up a credit union account for a company I worked for back in the 1990s, as a fringe benefit option for employees at my place of employment. Credit Unions act very much the same way as Banks, but instead of FDIC Deposit Insurance, they have a National Credit Union Deposit insurance. The local Credit Union I am looking at is the Kelley Federal Credit Union (if you care to look at it), but there are a huge number of credit unions all over the US. If you don't trust credit unions, or for any other reason are not comfortable with credit unions, then by all means stay away from them. Since I consider them almost identical to banks, I don't have your fears or trust issues.
You are making big, big assumptions about my fears and trusts. I have no reason to be fearful or have trust issues about something I do not have any knowledge about.
In this thread posters shared how a AAA rated insurance company can take years to get resolved, how FDIC banks are resolved and the duration depositors have to wait to access their funds and the relevance of the legacy deposit interest rate, how AAA CLOs are not like Treasury issues, @stillers explained why he sticks with bank CDs, and when and to whom insurance annuity products, CLOs, and other fixed income products may be appropriate. I applaud all these posters for taking the time to explain their POV, even though they are not trying to gain anything and sometimes in the face of (overt and implied) criticism about relevance.
Many posters in this thread have suggested to you choices but you discarded all of them (your have a right to do so) and in turn you mentioned about CU term deposits as a replacement for FDIC bank deposits. I have no reason to learn about CUs because I have plenty of other options, as I have stated in earlier posts, but I thought it would be good to the readers / lurkers to learn about why you thought it is a good idea to go to CUs (for a few more basis points relative to banks) in lieu of the other suggestions made in this thread or even FDIC bank deposits. Hence, my ask of the posters "Please educate us with examples of how depositors of CUs were protected (or not protected) when CUs got into trouble." If you do not know the answer to this, you do not have to reply but let someone who knows or wants to explore the ask reply. The ask is very much relevant for CU term deposits - may be not for you personally.
Kelly Community Federal Credit Union (KCFCU) in Tyler, Texas has been described as one of the most financially sound credit unions in the United States. KCFCU offers monthly and annual financial reports that include financial performance summaries, goals, commitments, and questions from members.
Credit unions are insured by the National Credit Union Administration (NCUA), which is similar to the Federal Deposit Insurance Corporation (FDIC) that insures banks. Most credit unions and banks are insured for up to $250,000 per customer.
KCFCU was founded in 1963 by employees from the Kelly-Springfield Tire Plant to provide a safe place for workers to save and borrow money. The credit union's mission is to treat members like family and prioritize relationships over transactions.
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dt, KCFCU appears to be a worthy place to invest your money.
That isn't the issue I have been beating to death on these threads which is duration.
Let me try a different angle:
What position do you think you are going to be in with interest bearing investment options in the 6-12 months after the investment you buy now matures?
Given the current rates and current trend, do you think you are going to be able to find an interest bearing investment of any duration paying 4+% in 6-12 months?
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Aside FWIW: You don't seem to care too much for my input, but buddy, I've been playing the CD ladder game for 12-13 years and I've not lost yet. I'm sitting a 5-yr, CP CD ladder paying a wee bit over 5% that was there for taking a year or so ago. Today, a 5-yr, 4+% CP CD ladder is there for the taking, for anyone who can step away from the tree and see the forest.
Our CD/Treasury ladder is only out to three years, but I'm 85 and don't want to go too far out. Our Schwab SUTXX MMKT is currently at 4.35% and falling, the CD/Treasury ladder is at 4.81%. I'm replacing CDs and Treasurys as they mature, which will gradually move out the ladder.
At the moment the allocation is CD/Treasury ladder 43% and MMKT 57%. The main difference that I consider between CD/Treasury ladder and MMKT allocations is the possible need for "instant cash" due to future major medical issues. If it weren't for that I'd put almost everything into the CD/Treasury ladder. When we were younger we never kept this kind of money in either CDs or MMKTs.
"Given the current rates and current trend, do you think you are going to be able to find an interest bearing investment of any duration paying 4+% in 6-12 months?"
I have no idea what interest rates will be in 6-12 months, but it sure seems to me that our new improved chief executive doesn't sound as if he's worried about tariffs or the inflation resulting therefrom.
Our CD/Treasury ladder is only out to three years, but I'm 85 and don't want to go too far out. Our Schwab SUTXX MMKT is currently at 4.35% and falling, the CD/Treasury ladder is at 4.81%. I'm replacing CDs and Treasurys as they mature, which will gradually move out the ladder.
At the moment the allocation is CD/Treasury ladder 43% and MMKT 57%. The main difference that I consider between CD/Treasury ladder and MMKT allocations is the possible need for "instant cash" due to future major medical issues. If it weren't for that I'd put almost everything into the CD/Treasury ladder. When we were younger we never kept this kind of money in either CDs or MMKTs.
Old_Joe, I have a very similar position on my Fixed Income positions. I have kept my CD Ladder at no more than 2 years, as I want my CD ladder to have ongoing CDs maturing pretty frequently, and have some liquidity issues better addressed with frequently maturing, short term CDs. I also have a wife who has very strong wish to have shorter term CDs in case she needs it "for a facelift"! Her way of saying that she may want a new car, a facelift, or surgery/treatment for one of the many "health related" issues we are monitoring closely! We also are dealing with a couple of Adult children and their families, who are continually needing financial support for health issues, losing jobs, needing money for an array of creative and surprising needs that crop up. In short, the shorter term CD ladder works fine for my situation, but may not be what others need, with their personal and financial situation.
BaluBalu: "What is going on? Over the years, I have seen some meaningful posts from you and I am surprised you are seriously considering a CU term deposit of any meaningful duration with the level of superficial information you shared as a reply to my post."
BaluBalu, when I got this post from you, in response to trying to give you some additional information about Credit Union Share Certificates, I was caught off guard, I felt attacked for just trying to be helpful to you. Credit Unions have been around for a very long time, and almost every major city has several of them. They are covered in several of the major Deposit Rating Services. To question my decision of "considering a CU term deposit of any meaningful duration" in such a well-known, long established, investment institution, sounded very strongly like you had fear and trust issues with them. When I read YBBs short little post to you about Credit Unions, there was nothing of significance in it that I had not previously included in my post to you about Credit Unions.
At any rate, I tried to be helpful and I am sorry it was not received by you in that way.
10 yr Agency with 1 yr CP are now available at 5.7%. I bought the same Agency a month ago at the same rate but only 6 mo CP. With 10 yr Treasuries moving up 30+ bps, Agency did not have to increase their rates because they are able to play with CP durations.
I see a lot of strategists falling over each other in issuing 2025 YE target but I have not come across anyone issuing their 10 Yr Treasury interest rate target. Please share if you see any 10 yr Treasury rate targets from professionals. Recent Treasury auction demand appeared solid - cure for high yields is high yields!?
Comments
In your first post today, you used the words "callable" and "non-callable" to mean the opposite of what they are commonly used for in the CD / bond land. Seems like everyone understood what you are trying to convey but it made your post a difficult read. In your future posts about the subject, please consider following convention.
********
This AM I received a notification that my JPM CD got called and will be cashed out on Jan 2. Note that I am not a strict CD investor - I eat what I get fed. I will be transferring the proceeds (via SGOV) to Fidelity to shop for a 10 yr Agency (likely callable too).
I also have a big Treasury Bill maturing in a couple of weeks at Fidelity (taxable). Likely goes into a MM fund to buy a Treasury Bond or a Treasury Bond fund to make some Duration bet and hope for negative correlation between Treasury bonds and equities. I could take some credit risk but with enough equity exposure, I will need attention when it is at a premium.
The above is mostly to help me to think out loud and may not be useful info to anyone else.
Regarding MMs, I am expecting all categories of MMs to fall below 4% in 2025--I will continue holding MMs but may reduce the amount I will keep in them.
11-20 3.18
11-27 2.86
12-4 2.15
12-11 2.91
12-18 3.60
Below are recent yields for VMSXX and SWOXX and again, they follow the weekly SIFMA Municipal Swap Index Yield. We will see what tomorrow brings.
11-19 3.38% 3.29%
11-20 3.41% 3.30%
11-21 3.33% 3.22%
11-22 3.14% 3.07%
11-25 3.09% 3.03%
11-26 3.03% 2.99%
11-27 3.00% 2.97%
11-29 2.90% 2.91%
12-2 2.85% 2.87%
12-3 2.79% 2.81%
12-4 2.70% 2.72%
12-5 2.55% 2.59%
12-6 2.17% 2.23%
12-9 2.07% 2.11%
12-10 1.99% 2.07%
12-11 1.99% 2.08%
12-12 2.13% 2.20%
12-13 2.58% 2.61%
12-16 2.72% 2.74%
12-17 2.83% 2.84%
12-18 2.95% 2.94%
12-19 3.05% 3.03%
12-20 3.32% 3.25%
12-21 3.42% 3.33%
12-24 3.59% 3.49%
I don't know anyone that invests only in 100% safe CDs and treasuries, and over the years I discussed investments with many people. I also don't like callable CDs and now have to find a new solution.
This is not a judgement, just an observation.
I switched to only/mostly bond funds because I could generate more performance than allocation funds with much lower risk.
To the questions, what would you if...? My approach has been tested in a recession, high inflation, and very quick rising rates, and it went well. Why change it?
I want to control my portfolio at all times. At anytime I can own MM,CDs, Treasuries if I want, but they have to be the best idea I have in that moment based on market conditions. It already did. From 01/2022 to early 11/2020 I was at 99+% MM, except very short (hours-days) several trades.
You should do what works for you. Good luck in the future.
I just don't believe we should stay on a narrow discussion. Annuities brought up, and I believe in low-volatility bond funds that might interest some posters.
I have suggested the following strategy to you a few times over the past year or so but you always seem to reject it. I'll try it one more time:
Buy 5-yr, CP CDs at the highest rate you can get and be happy.
Currently you can BUY 5-yr, CP, Fido, Secondary Issue CDs with Effective Yields (after discount) of just under 4.3%.
Had you followed my suggestion over a year ago, you would now have a 4-5-yr, CP CD ladder making over 5%, you would NOT be dealing with constant maintenance of your fixed income portfolio, and you would very likely have more income over that 5-yr period than the option you chose. (You got maybe 5.5% for one year, but now you're likely to get, on average, under 4% for the next 4 years, while I'm getting over 5% for the entire, same 5-years period)
You may not of course. You may have a little less.
BUT, you would have saved all the time and angst that was effectively wasted on fixed income portfolio maintenance. And that time is critical to us for (1) enjoying life and (2) spending it more productively on the portion of our portfolio that really matters, our stock sleeve.
ANNUITIES from insurance companies may anchor parts of the income stream. Types range from basic single premium immediate annuities (SPIAs) to fancy with guaranteed minimum withdrawal benefits (GMWB). Annuities with many bells & whistles are expensive, more profitable for the insurance companies & more lucrative to the selling agents. Many brokers & insurance agents push annuities because these have the highest commissions among the products they sell. Some annuity prospectuses may run 100-200 pages.
That is from an article on "Portfolio Income & Withdrawals" that I published in a local e-paper this week (the full weekly issue isn't out yet, may be later today). It may also be of interest to others here.
https://ybbpersonalfinance.proboards.com/post/1795/thread
Fixed annuity contracts are self-contained. Unlike mutual fund documentation, they are not broken into multiple parts: summary prospectus (outline), statutory prospectus (broad description of operation), and statement of additional information (legalize and structural info).
Add all those mutual fund pages together, and you might be at "just" 35 pages (Bruce fund BRUFX statutory prospectus + SAI), at 135 pages (VFIAX - 10 p. summary, 57 p. statutory, 78 p. SAI), or even find a humongous 575 pages (PIMIX - 5 p. summary, 142 p. statutory, 428 p. SAI).
Read a good bitcoin ETF prospectus lately? Those seem to run around 150 pages, with risk factors alone taking up scores of pages.
I pulled out an old SPDA contract I had years ago. Plain vanilla. Six pages on how the annuity could be annuitized plus a two page summary up front covering how the amount invested would grow (fixed rate) year by year and how much it would be worth annually including penalty if I closed it early. That's all.
Many if not most annuity contracts are complicated. But they don't have to be if all you're looking for is a fixed rate investment comparable to a CD. Things get at least a little more complicated if you're looking for an income stream (see, e.g. Social Security). And variable annuities? Now you're going up to potentially scores of pages for each fund offered inside the VA.
Aside: Great to see you posting!
Thanks for your comment Junkster. These threads invite a wide array of responses, from posters with a wide array of investing preferences, and a wide array of personal financial circumstances that are the background to their financial decision making. I try to sort through the posted information, to see how much applicability it has to my personal investing criteria. This thread has led to a large variety of posters and posted information. I don't have any interest in CLOs, and I "currently" don't have any interest returning to the bond oef world of trading and momentum based decision making. I don't care for annuities and unique risks/rewards. CDs have been paying a very nice 5+% return for the last year, but that seems to be on the decline. I have never used callable CDs, but they do offer a better interest rate than noncallable CDs, for about 6 months and possibly longer. I am inclined to invest some maturing CD cash into a local Credit Union Share Certificate that pays about a half percent more than I can get at Schwab or my local bank. Different strokes for different folks, and their varied financial strategies and circumstances.
A credit union share certificate is a type of savings account that offers a fixed interest rate for a set period of time:
How it works
You deposit money into a share certificate for a set term, usually between 3 months and 5 years. In exchange, you earn a higher interest rate, called a dividend, than a regular savings account. The longer the term, the higher the dividend.
Benefits
Share certificates are a good option if you want to earn interest on money you plan to use in the future. They can be a safer investment than stocks or mutual funds.
Risks
You'll incur penalties if you withdraw money before the term ends.
Insurance
Share certificates are federally insured by the National Credit Union Administration (NCUA) for up to $250,000 per depositor, per ownership category, per institution. This is similar to the coverage offered by the Federal Deposit Insurance Corporation (FDIC) for banks.
Comparison to certificates of deposit (CDs)
Share certificates are similar to CDs, but are offered by credit unions instead of banks. The main difference is the name.
I shall wait for @msf or YBB to reply to my post. I know it is an imposition on them because neither of them is seeking to invest in CU deposits but their reply would be a public service (as was my post - there are plenty of fish for me without looking at CUs).
The Federal National Credit Union Administration (NCUA, 1934- ) insures deposits at credit unions. These are nonprofit, smaller and simpler in functions and operations than banks, have some corporate, institutional or organizational connections, but their membership requirements can be met easily. The NCUA deposit coverage parallels that by the FDIC in most respects and that may be by design as many consumers use or treat credit unions and banks almost interchangeably. Some credit unions may be privately insured by the industry owned ASI.
You are making big, big assumptions about my fears and trusts. I have no reason to be fearful or have trust issues about something I do not have any knowledge about.
In this thread posters shared how a AAA rated insurance company can take years to get resolved, how FDIC banks are resolved and the duration depositors have to wait to access their funds and the relevance of the legacy deposit interest rate, how AAA CLOs are not like Treasury issues, @stillers explained why he sticks with bank CDs, and when and to whom insurance annuity products, CLOs, and other fixed income products may be appropriate. I applaud all these posters for taking the time to explain their POV, even though they are not trying to gain anything and sometimes in the face of (overt and implied) criticism about relevance.
Many posters in this thread have suggested to you choices but you discarded all of them (your have a right to do so) and in turn you mentioned about CU term deposits as a replacement for FDIC bank deposits. I have no reason to learn about CUs because I have plenty of other options, as I have stated in earlier posts, but I thought it would be good to the readers / lurkers to learn about why you thought it is a good idea to go to CUs (for a few more basis points relative to banks) in lieu of the other suggestions made in this thread or even FDIC bank deposits. Hence, my ask of the posters "Please educate us with examples of how depositors of CUs were protected (or not protected) when CUs got into trouble." If you do not know the answer to this, you do not have to reply but let someone who knows or wants to explore the ask reply. The ask is very much relevant for CU term deposits - may be not for you personally.
FYI - I have edited my post you quoted.
YBB, thanks.
Kelly Community Federal Credit Union (KCFCU) in Tyler, Texas has been described as one of the most financially sound credit unions in the United States. KCFCU offers monthly and annual financial reports that include financial performance summaries, goals, commitments, and questions from members.
Credit unions are insured by the National Credit Union Administration (NCUA), which is similar to the Federal Deposit Insurance Corporation (FDIC) that insures banks. Most credit unions and banks are insured for up to $250,000 per customer.
KCFCU was founded in 1963 by employees from the Kelly-Springfield Tire Plant to provide a safe place for workers to save and borrow money. The credit union's mission is to treat members like family and prioritize relationships over transactions.
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dt, KCFCU appears to be a worthy place to invest your money.
That isn't the issue I have been beating to death on these threads which is duration.
Let me try a different angle:
What position do you think you are going to be in with interest bearing investment options in the 6-12 months after the investment you buy now matures?
Given the current rates and current trend, do you think you are going to be able to find an interest bearing investment of any duration paying 4+% in 6-12 months?
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Aside FWIW: You don't seem to care too much for my input, but buddy, I've been playing the CD ladder game for 12-13 years and I've not lost yet. I'm sitting a 5-yr, CP CD ladder paying a wee bit over 5% that was there for taking a year or so ago. Today, a 5-yr, 4+% CP CD ladder is there for the taking, for anyone who can step away from the tree and see the forest.
At the moment the allocation is CD/Treasury ladder 43% and MMKT 57%. The main difference that I consider between CD/Treasury ladder and MMKT allocations is the possible need for "instant cash" due to future major medical issues. If it weren't for that I'd put almost everything into the CD/Treasury ladder. When we were younger we never kept this kind of money in either CDs or MMKTs.
I have no idea what interest rates will be in 6-12 months, but it sure seems to me that our new improved chief executive doesn't sound as if he's worried about tariffs or the inflation resulting therefrom.
BaluBalu, when I got this post from you, in response to trying to give you some additional information about Credit Union Share Certificates, I was caught off guard, I felt attacked for just trying to be helpful to you. Credit Unions have been around for a very long time, and almost every major city has several of them. They are covered in several of the major Deposit Rating Services. To question my decision of "considering a CU term deposit of any meaningful duration" in such a well-known, long established, investment institution, sounded very strongly like you had fear and trust issues with them. When I read YBBs short little post to you about Credit Unions, there was nothing of significance in it that I had not previously included in my post to you about Credit Unions.
At any rate, I tried to be helpful and I am sorry it was not received by you in that way.
I see a lot of strategists falling over each other in issuing 2025 YE target but I have not come across anyone issuing their 10 Yr Treasury interest rate target. Please share if you see any 10 yr Treasury rate targets from professionals. Recent Treasury auction demand appeared solid - cure for high yields is high yields!?
Happy Holidays, Derf