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I have a total of $30,000 i'm considering putting into one. And i'm looking into the 10 year plans. What would be my ending balance? and would I actually gain anything taking into account inflation?
Sorry, I have minimal knowledge on this subject. Somebody please tell me, thanks..
yuck 1 pct if you lock it up for 10 years no thanks
ing has .75 pct for savings-not saying thats great or anything and maybe there are better rates out there but that makes a ton more sense than locking your money up for 10 years at a garbage rate.
The rest of your message makes it sound more like you want a safe, reliable return on your money in excess of the rate of inflation. Unfortunately, there's no such thing available at this time. Generally, investments represent a balancing act between risk and reward, and the insistence on safety and reliable return precludes that return being substantial.
We have 6-8 months of expenses in cash in a high-yield savings account. It doesn't pay as much as those CDs, but the money isn't locked up - what good is an emergency fund if you have to pay a substantial penalty to get to the money when you need it? And setting up a CD ladder right now is simply not worth the bother, given the incredibly small difference between how much high-yield savings accounts pay and how much CDs pay.
The rest of our money invested. A certain amount of it is invested in bonds (or really, in high-quality balanced mutual funds that have a significant bond allocation - bonds are so messed up right now that I feel it best to leave it up to experts to make those decisions for me), and the rest mostly in growth equity index funds. I'm also relying to a small extent on value equity index funds in retirement accounts, which pay significant dividends, to make up a bit for how poorly bonds are paying these days. I've also dipped my toe into some alternative investments to make up for how poorly bonds are paying, with a floating-rate fund.
Incidentally, Everbank is currently paying 1.94%/1.96%APY on 5-year CDs, and PenFed is paying 2%/2.02%APY. Regardless, right now, there are no safe investments - if your principal is safe, then your return will be less than the rate of inflation.
historically cd's have returned 1 to 2% over the rate of inflation. sometimes more ,sometimes less. right now is one of those times they have a negative return after inflation and taxes.
I have a total of $30,000 i'm considering putting into one. And i'm looking into the 10 year plans. What would be my ending balance? and would I actually gain anything taking into account inflation?
Sorry, I have minimal knowledge on this subject. Somebody please tell me, thanks..
This is what I would do - with $30K. Take half of the money and invest in the CD for emergency fund. It's very safe. zero percent risk here but you are only going to get 1% increase.
with other $15K, I would buy Vanguard Index fund. Out new chairperson of the FED (Janet Yellen ?) only invest her money in Vanguard Index Fund. In general index funds are safe. But if the market crash tomorrow, of course you will see some pain but in 10 years it will come back or you hope it will come up. :-)
i hate to tell you index funds are no safer than any other stock funds. whatever applys to stock funds applys to index funds .
they can be even more volatile since shifting to more conservative investments , shedding near bankrupt stocks or going to more cash is not an option in a downturn unless voted on by the index sponsers...
if the op wants a safe secure non volatile place for their money a stock fund is not the answer.
Last edited by mathjak107; 10-26-2013 at 06:02 AM..
Right now would be a bad time to lock money up for an extended time with rates being as low as they are currently. Interest rates are being artificially depressed due to the Fed's policies to spur economic growth. Rates are about as low as they can go at this point. The benefit you have is your time horizon of 10 years.
Without knowing your entire situation (it is extremely challenging to give appropiate advice without knowledge of ones entire life circumstances), a suggestion could be take a portion of that and purchase I-Bonds, I believe the rate currently is 1.18% although an individual can only purchase up to $10K annually. The idea behind the I-Bond (Inflation Indexed Bond) is that it adjusts the rate semi-annually with a base rate and a rate tied to inflation to keep pace with inflation increases. You would need to hold the bond(s) at least a year and 5 years to avoid a 3 month penalty. These are also tax deferred so you will pay taxes after you cash them in. TIPS is another option you can consider.
Not knowing whether you have an investment portfolio or not you could as suggested start dollar cost averaging into a balanced portfolio of index funds. As mentioned above, you are taking on market risk whether it is in an index fund or active managed. It would be very prudent to dollar cost average in at this point because the market has been on a nice 5 year run and the odds of achieving the higher returns we've seen become less and less. You will probably want to set this up to happen automatically so you will not have to think about it.
The question you are asking is one of the most challenging especially for seniors that do not have the time horizon to take on market risk, yet are getting crushed by low interest rates and rising inflationary costs.
Like I mentioned above it is extremely difficult to give appropiate advice without more knowledge such as your age, income, savings/investments, married, kids, health, mortgage debt etc. etc.
IMHO CD's used to be a good investment as a part of your portfolio when they could have been locked into in the past (around 5 years ago) for over 5% but nowadays for the most part it is hard to find a decent rate of return unless you go long term. You might wish to look at some credit unions, some of which pay 1% on checking accounts.
Here is Fidelity CD list which changes all the time, to give you an idea of what interest rates you can expect to get.
For someone age 21 I would think long term retirement funds might be a better way to go for growth but I am an amateur when it comes to investing, so hopefully some of the experts will chime in.
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