purchasing cd's

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
jtelwood
Posts: 169
Joined: Wed Jun 11, 2008 9:45 am

purchasing cd's

Post by jtelwood » Tue May 08, 2018 9:38 am

I am thinking about using some bond money in my traditional ira with vanguard to purchase cd's but have never done this and would like to understand the process before moving forward. Any suggestions/recommendations on the best way to proceed would be greatly appreciated.

Thanks.

jte

User avatar
Earl Lemongrab
Posts: 5414
Joined: Tue Jun 10, 2014 1:14 am

Re: purchasing cd's

Post by Earl Lemongrab » Tue May 08, 2018 12:29 pm

What kind of CDs? Do mean directly purchased ones at a bank, or brokered CDs bought on the open market at a custodian like Vanguard or TD Ameritrade?
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

jtelwood
Posts: 169
Joined: Wed Jun 11, 2008 9:45 am

Re: purchasing cd's

Post by jtelwood » Wed May 09, 2018 8:08 am

The bond fund that I would use to purchase the CD's is in a tax deferred traditional IRA. I want the CD's to be in the tax deferred account . Is this possible? How would it be done?

Kennyt7
Posts: 70
Joined: Mon Jan 19, 2015 7:28 pm

Re: purchasing cd's

Post by Kennyt7 » Wed May 09, 2018 8:16 am

at vanguard go to investing and then view current cd rates or call them to have them walk you through the process
quite easy

livesoft
Posts: 62699
Joined: Thu Mar 01, 2007 8:00 pm

Re: purchasing cd's

Post by livesoft » Wed May 09, 2018 8:32 am

Sell your bond fund shares by clicking on "Sell", then click on "Buy" after choosing your CD at Vanguard.

Have you tried to go through the motions to see how it works? You can stop by clicking on "Cancel" instead of "Confirm."

It is easier than reading the answers in this thread. :)

Good luck!
Wiki This signature message sponsored by sscritic: Learn to fish.

User avatar
Earl Lemongrab
Posts: 5414
Joined: Tue Jun 10, 2014 1:14 am

Re: purchasing cd's

Post by Earl Lemongrab » Wed May 09, 2018 10:55 am

jtelwood wrote:
Wed May 09, 2018 8:08 am
The bond fund that I would use to purchase the CD's is in a tax deferred traditional IRA. I want the CD's to be in the tax deferred account . Is this possible? How would it be done?
Either kind can be purchased in an IRA. What exactly are you looking for in an investment CDs fill the bill? Brokered CDs are lot more like individual bonds than the ones you get directly from a bank. But the former are easier to buy in an IRA.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

lazyday
Posts: 3297
Joined: Wed Mar 14, 2007 10:27 pm

Re: purchasing cd's

Post by lazyday » Wed May 09, 2018 11:12 am

Just be aware that unlike with a typical bond fund, a brokered CD selling price can be significantly lower than the buying price. It might be best to only buy brokered CDs that you intend to keep until maturity.

It's also possible to buy a CD directly from a bank or credit union by transferring part of your IRA. But it can be a pain and a slow process. Sometimes, by the time your money has transferred, the rate has been cut and you have to transfer the money back to your broker. To me, direct CDs in an IRA are only worthwhile for a much better interest rate and a large purchase.

sport
Posts: 7257
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: purchasing cd's

Post by sport » Wed May 09, 2018 11:41 am

This should tell you what you need to know about CDs at Vanguard.

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

livesoft
Posts: 62699
Joined: Thu Mar 01, 2007 8:00 pm

Re: purchasing cd's

Post by livesoft » Wed May 09, 2018 11:48 am

lazyday wrote:
Wed May 09, 2018 11:12 am
Just be aware that unlike with a typical bond fund, a brokered CD selling price can be significantly lower than the buying price. It might be best to only buy brokered CDs that you intend to keep until maturity.
You mean brokered CDs on the secondary market. Many people on this forum think that a brokered CD is any CD bought at one's broker. Not true.
Wiki This signature message sponsored by sscritic: Learn to fish.

protagonist
Posts: 5387
Joined: Sun Dec 26, 2010 12:47 pm

Re: purchasing cd's

Post by protagonist » Wed May 09, 2018 12:13 pm

jtelwood wrote:
Tue May 08, 2018 9:38 am
I am thinking about using some bond money in my traditional ira with vanguard to purchase cd's but have never done this and would like to understand the process before moving forward. Any suggestions/recommendations on the best way to proceed would be greatly appreciated.

Thanks.

jte
Find the best available bank CD rates at depositaccounts.com
Pay careful attention to early withdrawal penalties. If they are generous enough, you can have the same flexibility with a long term CD as with a short term while getting better yields.

lazyday
Posts: 3297
Joined: Wed Mar 14, 2007 10:27 pm

Re: purchasing cd's

Post by lazyday » Wed May 09, 2018 12:19 pm

livesoft wrote:
Wed May 09, 2018 11:48 am
You mean brokered CDs on the secondary market.
Selling on the secondary market, yes. But it still applies if you buy a new issue and later want to sell. Or course bond funds can drop in price over time, but at least you can generally sell a bond fund at about the same price someone else can buy.
Many people on this forum think that a brokered CD is any CD bought at one's broker. Not true.
Can you give a counterexample?

cjg
Posts: 62
Joined: Sat Jan 11, 2014 9:03 pm

Re: purchasing cd's

Post by cjg » Wed May 09, 2018 12:48 pm

protagonist wrote:
Wed May 09, 2018 12:13 pm
Find the best available bank CD rates at depositaccounts.com
Pay careful attention to early withdrawal penalties. If they are generous enough, you can have the same flexibility with a long term CD as with a short term while getting better yields.
I'd look at them but would be cautious about early withdrawal penalties since the NCUA has ruled that they can be changed.

https://www.depositaccounts.com/blog/20 ... g-cds.html

lazyday
Posts: 3297
Joined: Wed Mar 14, 2007 10:27 pm

Re: purchasing cd's

Post by lazyday » Thu May 10, 2018 2:57 am

livesoft wrote:
Wed May 09, 2018 11:48 am
Many people on this forum think that a brokered CD is any CD bought at one's broker. Not true.
Are there CD's you can buy from a broker that are not brokered CDs?

There might be something I don't understand, please fill me in.

mggray17
Posts: 83
Joined: Thu Feb 11, 2010 8:09 am

Re: purchasing cd's

Post by mggray17 » Thu May 10, 2018 4:35 am

cjg wrote:
Wed May 09, 2018 12:48 pm
protagonist wrote:
Wed May 09, 2018 12:13 pm
Find the best available bank CD rates at depositaccounts.com
Pay careful attention to early withdrawal penalties. If they are generous enough, you can have the same flexibility with a long term CD as with a short term while getting better yields.
I'd look at them but would be cautious about early withdrawal penalties since the NCUA has ruled that they can be changed.

https://www.depositaccounts.com/blog/20 ... g-cds.html
Step 1. Look at Bankrate rates. Step 2. Look at 2 Yr New Issue Brokered at Vanguard. Step 3. Buy what you see.
Site is down for maintenance as I type, but just bought 2 YR CD at Vanguard at 2.75 APY.

User avatar
dm200
Posts: 18305
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: purchasing cd's

Post by dm200 » Thu May 10, 2018 9:49 am

lazyday wrote:
Thu May 10, 2018 2:57 am
livesoft wrote:
Wed May 09, 2018 11:48 am
Many people on this forum think that a brokered CD is any CD bought at one's broker. Not true.
Are there CD's you can buy from a broker that are not brokered CDs?
There might be something I don't understand, please fill me in.
I do not think so..

User avatar
dm200
Posts: 18305
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: purchasing cd's

Post by dm200 » Thu May 10, 2018 9:51 am

livesoft wrote:
Wed May 09, 2018 11:48 am
lazyday wrote:
Wed May 09, 2018 11:12 am
Just be aware that unlike with a typical bond fund, a brokered CD selling price can be significantly lower than the buying price. It might be best to only buy brokered CDs that you intend to keep until maturity.
You mean brokered CDs on the secondary market. Many people on this forum think that a brokered CD is any CD bought at one's broker. Not true.
Could you elaborate why this is "not true"?

protagonist
Posts: 5387
Joined: Sun Dec 26, 2010 12:47 pm

Re: purchasing cd's

Post by protagonist » Thu May 10, 2018 10:28 am

mggray17 wrote:
Thu May 10, 2018 4:35 am
cjg wrote:
Wed May 09, 2018 12:48 pm
protagonist wrote:
Wed May 09, 2018 12:13 pm
Find the best available bank CD rates at depositaccounts.com
Pay careful attention to early withdrawal penalties. If they are generous enough, you can have the same flexibility with a long term CD as with a short term while getting better yields.
I'd look at them but would be cautious about early withdrawal penalties since the NCUA has ruled that they can be changed.

https://www.depositaccounts.com/blog/20 ... g-cds.html
Step 1. Look at Bankrate rates. Step 2. Look at 2 Yr New Issue Brokered at Vanguard. Step 3. Buy what you see.
Site is down for maintenance as I type, but just bought 2 YR CD at Vanguard at 2.75 APY.
Greenwood Credit Union (easy to join) currently has a 2 yr CD, 180 day EWP, at 2.8%. Very similar. Do you think that brokered CDs offer an advantage over bank CDs, and if so, why? I imagine if interest rates rise rapidly the value of a brokered CD on premature sale could decrease quite dramatically- I don't know how that would compare with breaking a bank CD and paying the EWP. I have no experience with brokered CDs.

livesoft
Posts: 62699
Joined: Thu Mar 01, 2007 8:00 pm

Re: purchasing cd's

Post by livesoft » Thu May 10, 2018 10:47 am

dm200 wrote:
Thu May 10, 2018 9:51 am
Could you elaborate why this is "not true"?
A new-issue CD purchased at any broker and held to maturity is exactly like a CD purchased at a bank and held to maturity. All the blather about "brokered CDs" just does not apply in such situations. There is no commission to buy such CDs and no commission to sell them since they are never sold by the buyer.

I suspect that most folks on this forum buying CDs at their brokers go the new issue route just as most folks buying CDs at a bank or savings institution do, but I suppose we could engineer a poll to find out.
Wiki This signature message sponsored by sscritic: Learn to fish.

User avatar
dm200
Posts: 18305
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: purchasing cd's

Post by dm200 » Thu May 10, 2018 11:25 am

livesoft wrote:
Thu May 10, 2018 10:47 am
dm200 wrote:
Thu May 10, 2018 9:51 am
Could you elaborate why this is "not true"?
A new-issue CD purchased at any broker and held to maturity is exactly like a CD purchased at a bank and held to maturity. All the blather about "brokered CDs" just does not apply in such situations. There is no commission to buy such CDs and no commission to sell them since they are never sold by the buyer.
I suspect that most folks on this forum buying CDs at their brokers go the new issue route just as most folks buying CDs at a bank or savings institution do, but I suppose we could engineer a poll to find out.
Not "exactly" - there are some differences.

1. The issuing bank has no knowledge of the owners of such CDs. if the bank fails, then there is (or may be) a slight delay as the FDIC coordinates owners of insured CDs - both direct issue and brokered.

2. Such CDs purchased through brokers cannot renew automatically and cannot accrue/compound interest.

Post Reply