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CDs and Money Markets

dtconroe
in Fund Discussions
With all of the market turmoil, I am sitting in CDs and MMs without stress, but not willing to jump back into more risky investment classes. It appears that CDs are paying less than SNAXX and SWVXX MMs at Schwab brokerage, so I have been putting maturing CDs into MMS. I have been "put off" by all of the talk that FDIC insurance may be in jeopardy, but I don't have a clear idea what might replace it--so I see MMs as a more attractive option than lower paying CDs. I have looked at lower risk bond oefs like RPHIX, but I don't find their returns that attractive in this market environment with the unpredictability of our political chaos. At age 77, I don't have appetite for risk.

Anyone else experiencing similar investing thoughts?

Comments

  • WABACWABAC
    Yeah, I'm too old to stockpile gold, ammo, and freeze-dried food. :)

    I put some money in BUBIX. Other options I'm considering are FCNVX, ICSH, SGOV, and so on. Higher rated bonds, short durations, low prices, and for the ETF's large AUM.
  • racqueteer
    FWIW, I've been carrying a lot of USFR for probably a year as my 'bond' component; so I never really made that changeover. I also sold all equities more than a week ago. So, yeah, I would say that we have been maintaining a low profile and have that in common at present.
  • msf
    ISTM that if the FDIC were to be wound down in an orderly manner (hah!), only new deposits would be at risk. So this possibility doesn't strike me as a reason to avoid CDs or other insured bank accounts.

    OTOH, if the FDIC were to implode due to attrition, lack of official support, etc., then we could see a full blown banking crisis as poorly supervised banks collapsed and bank runs ensued. In that case, loss of one's bank deposit might be chickenfeed compared with other consequences.

    Either way, my attitude for the moment is "don't worry, be happy" - well, calm at least.

    You could also look at T-bills. They're backed by the full faith and credit of the US, just like the FDIC:-( The latest auction (last Thurs) sold 1 and 2 month T-bills with yields of 4.30% and 4.29%, state tax-free. Along the same lines if you don't like managing individual securities, something like SGOV is a possibility (current SEC yield of 4.2%).

    Ultimately cash is cash, and you're not going to eek out more than a quarter percent one way or the other without taking on more risk.
  • hank
    edited March 22
    Just bought a new replacement window with solid wood frame identical to one purchased from same dealer in February 2018 - just over 7 years ago.

    Price in February 2018 with 3-day promised delivery $400

    Price today with 6-week estimated delivery $675

    Increase $275

    Percent of increase about 65%

    Divided by 7 (years) = about 9.25% per year

    Bottom line - 4.5% on mm accounts probably isn’t going to protect your savings against inflation - at least in the housing / construction / materials sectors.

    Not trying to steal your thread @dtconroe. But I think any discussion of “return” needs to consider the impact of inflation.

    Thanks for the ”cheery” commentary @msf / One wonders what current or former Fox News host may end up running the FDIC and “protecting” our savings - - Bartiromo?
  • larryB
    @Dt. I am with you 100%. I am way more interested in return of my capital than return on capital. I watch the market with a sense of detachment I haven’t had since the sixties,,, when I cheered for the markets to crash. I too worry about the FDIC. My biggest concern is social security. If it were up to Dodick it would already be shut down. But the intent is pretty clear.
  • dtconroe
    Hank, you are not stealing my thread, and your perspective on investments is appreciated.
  • Old_JoeOld_Joe
    edited March 23
    Re "stealing" threads: As you all know, for better or worse I do start a fair number of threads. I don't think of them as "my" threads- they're MFO community threads. And if they sometimes take off in unexpected directions, that's great- all of this stuff is interesting.
  • Sven
    Agree with @Old_Joe,
    The way I look at it is the direction of the tread continued to evolve, and that is okay for the purpose of discussion.
  • fred495
    edited 1:14AM
    I am a little older than you, dt, and also don't have much appetite for risk. However, I do want to beat inflation and aim to have my portfolio earn an annual total return of around 5-7%.

    Currently, about 25% of my portfolio is invested in CDs from large national banks, and if they go under then the FDIC will not be of much help anyway. About 50% is in bond funds like CBLDX, ICMUX, RCTIX, etc., and the remaining 25% is in a MM fund for the time being.

    Once the Trump tariff induced market turbulence subsides, my thoughts are to invest the MM funds in low SD alternative funds such as QDSNX, QQMNX, etc., and perhaps a balanced fund like PRCFX. But, for this segment of my portfolio I will always be dancing near the exit.

    Good luck.
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