Parking cash in Vanguard CDs. How easy is it?

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HenryPorter
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Parking cash in Vanguard CDs. How easy is it?

Post by HenryPorter » Wed May 10, 2017 1:27 pm

Looking at creating a CD ladder. Vanguard looks like it has competitive rates for the multi-year CDs. Does Vanguard assist much with buying CDs off their site or are you on your own mostly? Is it as easy as putting the CDs in a shopping cart and then going to a check-out page to fund them? The convenience of buying CDs through Vanguard, plus the rates offered makes going to local banks and spending time in driving around and filling out paper work such a no-contest IMHO. What am I missing? I see some CDs might be callable? Is that right? What are the pros and cons? I am comfortable tying up cash for 5 years at the 2%+ rates offered, so I am not interested in buying into an equity or money market or bond fund with this cash.

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dm200
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Re: Parking cash in Vanguard CDs. How easy is it?

Post by dm200 » Wed May 10, 2017 1:29 pm

HenryPorter wrote:Looking at creating a CD ladder. Vanguard looks like it has competitive rates for the multi-year CDs. Does Vanguard assist much with buying CDs off their site or are you on your own mostly? Is it as easy as putting the CDs in a shopping cart and then going to a check-out page to fund them? The convenience of buying CDs through Vanguard, plus the rates offered makes going to local banks and spending time in driving around and filling out paper work such a no-contest IMHO. What am I missing? I see some CDs might be callable? Is that right? What are the pros and cons? I am comfortable tying up cash for 5 years at the 2%+ rates offered, so I am not interested in buying into an equity or money market or bond fund with this cash.

These are brokered CDs, so you need to understand such CDs.

It is very easy. You can do it online or (no extra charge) speak with a Vanguard broker.

Some brokered CDs are callable, but most are not. That is your choice.

The current 5 year brokered CD at vanguard (not callable) is 2.40% paid semiannually (not compounded).

sport
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Re: Parking cash in Vanguard CDs. How easy is it?

Post by sport » Wed May 10, 2017 1:37 pm

I just bought my first brokered CD at Vanguard. I did it on line. It was very easy. The description will tell you if the CD is callable. The advantage of a callable CD is that it might pay a little higher rate. The disadvantage is if rates go down, the bank will call the CD and give you your money back, instead of paying an above market rate to you. The link below is Vanguard's explanation of brokered CDs and the advantages and disadvantages compared to direct CDs. It should answer most of your questions.

https://personal.vanguard.com/us/conten ... ontent.jsp

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dm200
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Re: Parking cash in Vanguard CDs. How easy is it?

Post by dm200 » Wed May 10, 2017 1:41 pm

sport wrote:I just bought my first brokered CD at Vanguard. I did it on line. It was very easy. The description will tell you if the CD is callable. The advantage of a callable CD is that it might pay a little higher rate. The disadvantage is if rates go down, the bank will call the CD and give you your money back, instead of paying an above market rate to you. The link below is Vanguard's explanation of brokered CDs and the advantages and disadvantages compared to direct CDs. It should answer most of your questions.

https://personal.vanguard.com/us/conten ... ontent.jsp
For an organization I manage (part time), we hold a lot of brokered CDs - most not callable. When I have seen a difference in the last year or so, the callable CDs have paid about 5 basis points higher. We have purchased several - so we shall see.

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Tyler Aspect
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Re: Parking cash in Vanguard CDs. How easy is it?

Post by Tyler Aspect » Wed May 10, 2017 2:06 pm

The last time I did was to go to Vanguard's web site on Sunday and browse their CD offering list for CDs that are not callable and sells with an ask price below 100. I wrote down the best yield offers around the maturity date that I am interested.

Then on Monday I would browse the offering list again to search for CDs for purchase. You can use the best offer found on Sunday to compare the deals that are being offered. You can click on a CD to see a list of seller's offering prices. When you go ahead and purchase a target CD the yield may be slightly lower because it now factors into the commission that will have to be paid.

After you go through the purchase decision you will see the web site generate a buy order with limit price set at the target ask price. If all goes well then your order will be fulfilled within a minute.

Just be mindful that if you need to sell a CD on the secondary market then you could lose a few percent of principle valuation.
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.

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dm200
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Re: Parking cash in Vanguard CDs. How easy is it?

Post by dm200 » Wed May 10, 2017 2:08 pm

Tyler Aspect wrote:The last time I did was to go to Vanguard's web site on Sunday and browse their CD offering list for CDs that are not callable and sells with an ask price below 100. I wrote down the best yield offers around the maturity date that I am interested.
Then on Monday I would browse the offering list again to search for CDs for purchase. You can use the best offer found on Sunday to compare the deals that are being offered. You can click on a CD to see a list of seller's offering prices. When you go ahead and purchase a target CD the yield may be slightly lower because it now factors into the commission that will have to be paid.
After you go through the purchase decision you will see the web site generate a buy order with limit price set at the target ask price. If all goes well then your order will be fulfilled within a minute.
Just be mindful that if you need to sell a CD on the secondary market then you could lose a few percent of principle valuation.
New Issue CDs can be purchased at any time (nights, weekends, etc.). You do not need to wait until markets are open for new issues

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