The threat of rising interest rates is causing significant concerns among stock investors, bond investors, adjustable rate mortgagees, and home buyers. The reasons for concern, respectively, are lower stock prices, lower bond prices, increase in mortgage payments, and higher monthly costs for buying a house.
However, the fixed income investor who holds bonds/CDs to maturity or the money market investor is likely very happy. For them, the return on their new investment purchases will increase. To me, now is the time to make a some CD purchases to lock in higher interest rates for the short term.
On June 22, 2007, I purchased CDs paying 5.25% that mature on September 22, 2008. That's 18 months of 5.25% return, risk free since the CDs are FDIC insured. I purchased my CDs through TD Ameritrade, over the phone. I prefer to purchase CDs through my discount brokerage accounts, TD Ameritrade or Schwab, to keep all my CDs in one place and avoid paperwork and transportation time needed at a local bank.
If preferred, one can find the absolute best CD rates of the week at Bank Deals weekly rate round up every Saturday. For instance, on July 7, 2007, Bank Deals lists four banks that will pay 5.4 to 5.5 % for an 18 month CD, which is better than the 5.25% I got above.
For more on Ideas You Can Use, check back every Tuesday for a new segment.
Photo Credit: morgueFile.com, Michael Connors
However, the fixed income investor who holds bonds/CDs to maturity or the money market investor is likely very happy. For them, the return on their new investment purchases will increase. To me, now is the time to make a some CD purchases to lock in higher interest rates for the short term.
On June 22, 2007, I purchased CDs paying 5.25% that mature on September 22, 2008. That's 18 months of 5.25% return, risk free since the CDs are FDIC insured. I purchased my CDs through TD Ameritrade, over the phone. I prefer to purchase CDs through my discount brokerage accounts, TD Ameritrade or Schwab, to keep all my CDs in one place and avoid paperwork and transportation time needed at a local bank.
If preferred, one can find the absolute best CD rates of the week at Bank Deals weekly rate round up every Saturday. For instance, on July 7, 2007, Bank Deals lists four banks that will pay 5.4 to 5.5 % for an 18 month CD, which is better than the 5.25% I got above.
For more on Ideas You Can Use, check back every Tuesday for a new segment.
Photo Credit: morgueFile.com, Michael Connors
This is not financial advice. Please consult a professional advisor.
Copyright © 2007 Achievement Catalyst, LLC
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2 comments:
Since you have a TD Ameritrade account, I thought that I would also mention The Reserve Yield Plus (Enhanced Cash) Fund. A while back I wrote on PFStock that it is a completely liquid fund, but is not offered as a "sweep" option. Currently, it is paying about 5.3%, and the symbol is RYPQX. On TD Ameritrade, it trades as a No-Transaction Fee (NTF) mutual fund. When comparing against a CD, I prefer to keep my cash more liquid. But, the downside is that the rate may fluctuate; it is not fixed for 18 months like your CD.
PF Stock,
Thanks for the information. I didn't know that The Reserve Yield Plus had such high returns. I will look into it as a possible place to hold cash.
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