Alternative to CDs

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jimlandis
Posts: 77
Joined: Fri Nov 30, 2007 3:16 pm

Alternative to CDs

Post by jimlandis »

Dear Bogleheads
This ia my first post, following a long love of Taylor's Diehards.
Given the decreasing interest rate environment of MM and CDs, is there any good or bad wisdom of getting into a few Preferred stocks to compliment my 100% V.G. IRA conservative portfolio of Prime MM and a few brockerage CDs? Just looking to get a better rate of return.

I'm 73, very conservative and try to avoid too much volatility.

Many thanks for any advice or information.
Jim
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Rob5TCP
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Location: New York, NY

re: CD's

Post by Rob5TCP »

Short term, highly rated (not mortgage backed) bonds will come down as interest rates are lowered - for complete safety (exclusive of inflation) CD's are the safest play - you can get a yield boost, several banks including Penfed.org are known for having yearly "sales" on Cd's. Last time in Sept they 1-3 year yields were 6%.
I go to their website every few weeks to see if there are any "specials"
MLP will give you much higher yields, but with much higher risk.
plake15
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Post by plake15 »

That the problem for older people now being we are in a lowering interest rate enviroment.

older people that no longer want to deal with stocks volitality and have exited for CDs,etc.. now have to deal with less in returns cause of lower rates.

maybe you can consider something very conservative..like a 30% equites 70% fixed in an income fund?
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DaveTH
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Post by DaveTH »

Preferred stocks can be highly volatile and you can easily lose your principal. I held several high-rated preferreds from Royal Bank of Scotland earlier in the year and I lost a ton of money on them. I never thought that the par value would have sunk so low but it did. Sure they had a coupon rate in excess of 6% but the principal value dropped way lower than that. I would avoid them.
sport
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Location: Cleveland, OH

Post by sport »

Longer term CDs are still yielding more than 5%. If you get these, you can "lock in" this rate for 5 or 6 years.

Best wishes,
Jeff
clay
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Joined: Sat Jun 30, 2007 11:08 am

Post by clay »

jsl11 wrote:Longer term CDs are still yielding more than 5%. If you get these, you can "lock in" this rate for 5 or 6 years.
Any pointers to where? Most of the places I'm familiar with (but I'm hardly an expert) are closer to 4.3% or so.

Thanks,
CS
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Rob5TCP
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re: CD's

Post by Rob5TCP »

Check this site - it finds best CD rates all over the country - I find it vastly superior to bankdeals.com It may take weeks or longer to find your best rate, but it is usually worth it.


http://bankdeals.blogspot.com/
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Taylor Larimore
Advisory Board
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Preferred Stocks?

Post by Taylor Larimore »

Hi Jim:
Welcome to the Bogleheads forum!

Pat and I are cruising aboard Oceania's
"Regatta." One of the books in the ship's library is Larry Swedroe's Bond book. Larry warns against preferred stocks. I think he's right.

The most important thing for retirees to understand is that it is more important to keep what we have than to get greedy seeking a higher return. Higher return nearly always means higher risk.

Stick to conservative investments that you understand.

Best wishes
Taylor
In Tobego
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Rob5TCP
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Location: New York, NY

re: be aware if callable CD's

Post by Rob5TCP »

If you stay with higher yielding CD's beware of callable CD's. They have teaser rates of 6 or even 7 percent for the first year. Then for the next 5, 10 or 20 years they can be called by the bank at any time. So, if interest rates rise, you stay stuck with whatever the yield is. If interest rates fall, they will call in the CD and you will have to reinvest at a lower rate.
Topic Author
jimlandis
Posts: 77
Joined: Fri Nov 30, 2007 3:16 pm

Taylor

Post by jimlandis »

Thanks everyone for your thoughtful help. I really appreciate it.

An extra "thank you" to Taylor for responding to me from his (and Pat's) criuse ship vacation. You are a very special man, Taylor.

Enjoy -- Enjoy

Best wishes
Jim
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