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Originally Posted by Grizzly Addams
I really appreciate the responses.
By restricted do you mean can't withdraw without paying a penalty? If so then the money tied up in my companies stock is not restricted once purchased. Last purchasing period I sold it right away and transferred it to my checking account (regretting this decision as the stock has done really well since).
I'm just wondering if I will yield more returns if my money sits in the brokerage account vs my Wells Fargo savings account (not to mention the opportunity I have to invest that money)
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I'm not sure on the employee account. It really depends. You'd have to talk with someone at your workplace tbh. Many plans are restricted. It sounds like yours may not be.
The thing with retail banks is that they can accept smaller bits of money to buy larger offerings. If I offer everyone 1.5% here, and I get 10 people that want a year CD at that rate, I can turn around and get a national CD today for 2.35%. I've got .85% of profit for getting the money together. For the people with $1,000, that's good too, because they get something instead of nothing. The problem at the middle tier is if you have 19 people say ok to 1.5% and you can only buy in $10,000 increments.
So all I'm saying is that you can get a better CD rate by going through a broker than you can a retail bank. Doesn't matter if they're "good" or not. There market is getting smaller investments.
Where some are crying foul, with good reason, is that there are other options once you are there. You could let it sit in you default Money Market....doing nothing got me 1.68 last month. Some of those are protected, some aren't, you need to check with your broker. To me there's no risk there save if the banks stop lending to one another. Even then...you still need your money in a bank. Plus you have access to your cash whenever you need it.
If you're for sure on a 2 year period, you could also buy some high quality bonds. HSBC has a 2 year that's yielding 3.11% Of course, there's risk there, but it's much safer than a stock dividend. HSBC isn't going to go bankrupt in 2 years. If they do, we're all toast anyway. So the bond is going to pay out. The danger for bond holders is inflation. If you're paid 3.11%, and 25% of that is going to tax, did you beat inflation? The answer is generally....by a tiny bit. Some people then conclude it's silly, but, if you have your money in a retail CD for the same timeframe, you probably won't match inflation. Hence your dollars are there in both cases, but the buying power is reduced.
Bonds go up and down based upon this. However, if you buy something and hold it to maturity....you really don't have to worry about that. That's what bond traders do. They're a lot more in the know than you or me.
So your year 1 breaks down like this:
Go to Ally bank, get their 1.45% - you're familiar, they're happy, you're happy - $580 earned
Go to Fidelity or Schwab or someone and they get you in your core (cash) position and you never trade - ~$664 (it will vary)
Go to Fidelity or Schwab and buy a national CD - $940
Go to Fidelity or Schwab and buy a 2 year bond - $1,252
No wrong moves. Just offering info.
Your bigger danger is if inflation starts moving to 5% or so, you lose buying power....albeit less than if you were in a retail CD for the same timeframe. The bond professionals play a whole different game. If you're just a buy and hold and stick with solvent companies...you'll get your return.
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