Are CDs considered an investment?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
neveragain
Posts: 252
Joined: Mon May 29, 2017 3:01 pm

Are CDs considered an investment?

Post by neveragain » Fri Aug 31, 2018 10:50 am

Perhaps not years ago but lately CD rates are rising high and I got some CDs with over 3% interest rate. I have a CD ladder and the 5 year CD interest rate is 3.5%. I wanted some money to be in safe investments and to me, the interest rates made it worthwhile. And I felt CDs were safer than bond funds. But some people say CDs are not an investment, just a way to save money.

HEDGEFUNDIE
Posts: 1220
Joined: Sun Oct 22, 2017 2:06 pm

Re: Are CDs considered an investment?

Post by HEDGEFUNDIE » Fri Aug 31, 2018 10:55 am

neveragain wrote:
Fri Aug 31, 2018 10:50 am
But some people say CDs are not an investment, just a way to save money.
What is the difference?

User avatar
EddieGee
Posts: 47
Joined: Sun Jan 08, 2017 2:19 pm

Re: Are CDs considered an investment?

Post by EddieGee » Fri Aug 31, 2018 10:58 am

I would define an "investment" as something you purchase with the intent of receiving either income and/or capital gains.

You buy a CD with the intent of receiving interest.

If it looks like a duck, waddles like a duck, quacks like a duck...

User avatar
flamesabers
Posts: 1757
Joined: Fri Mar 03, 2017 12:05 pm
Location: Rochester, MN

Re: Are CDs considered an investment?

Post by flamesabers » Fri Aug 31, 2018 10:59 am

Yes, I would say CDs are an investment. I regard them to be FDIC-insured bonds.

WhiteMaxima
Posts: 1496
Joined: Thu May 19, 2016 5:04 pm

Re: Are CDs considered an investment?

Post by WhiteMaxima » Fri Aug 31, 2018 11:02 am

CD is not an investment. It is just a piggy back for adult. A bank issues CD is an investment: paying less for deposit and lend same money at high rate to make the difference. I would buy dividend paying bank stock. The spread the risk, I will buy different bank stocks.

stimulacra
Posts: 380
Joined: Wed Dec 21, 2016 3:50 pm
Location: Houston

Re: Are CDs considered an investment?

Post by stimulacra » Fri Aug 31, 2018 11:03 am

I would say yes… or I would clarify to categorize it within an asset class.

CD Ladders are definitely an investment strategy (similar in concept to Bond Ladders)… you are using ladders to lock in higher interest rates (hopefully) and mitigating the opportunity costs of tying up a specific sum of money for that duration. Your money is tied up with the ladder.

So I would say it is an investment strategy, just with a more low-risk asset class.

Any old savings account is a bit more liquid.

neveragain
Posts: 252
Joined: Mon May 29, 2017 3:01 pm

Re: Are CDs considered an investment?

Post by neveragain » Fri Aug 31, 2018 11:03 am

WhiteMaxima wrote:
Fri Aug 31, 2018 11:02 am
CD is not an investment. It is just a piggy back for adult. A bank issues CD is an investment: paying less for deposit and lend same money at high rate to make the difference. I would buy dividend paying bank stock. The spread the risk, I will buy different bank stocks.
How much interest would a CD need to pay out for you to consider it more of an investment?

rgs92
Posts: 2273
Joined: Mon Mar 02, 2009 8:00 pm

Re: Are CDs considered an investment?

Post by rgs92 » Fri Aug 31, 2018 11:05 am

It's the fixed income part of your portfolio. Your entire portfolio, with re-balancing periodically, is your investment portfolio.

stimulacra
Posts: 380
Joined: Wed Dec 21, 2016 3:50 pm
Location: Houston

Re: Are CDs considered an investment?

Post by stimulacra » Fri Aug 31, 2018 11:08 am

neveragain wrote:
Fri Aug 31, 2018 11:03 am
WhiteMaxima wrote:
Fri Aug 31, 2018 11:02 am
CD is not an investment. It is just a piggy back for adult. A bank issues CD is an investment: paying less for deposit and lend same money at high rate to make the difference. I would buy dividend paying bank stock. The spread the risk, I will buy different bank stocks.
How much interest would a CD need to pay out for you to consider it more of an investment?
Trying to seek equity like returns from CDs is missing the point I feel like. That's not why one would buy CDs.

I think at one point Stanford International Bank's CDs were paying out 7.45% interest… I would say it was a poor investment.

User avatar
cheese_breath
Posts: 8083
Joined: Wed Sep 14, 2011 7:08 pm

Re: Are CDs considered an investment?

Post by cheese_breath » Fri Aug 31, 2018 11:15 am

I don't know, and I don't care.
The surest way to know the future is when it becomes the past.

User avatar
ruralavalon
Posts: 14254
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Are CDs considered an investment?

Post by ruralavalon » Fri Aug 31, 2018 11:36 am

neveragain wrote:
Fri Aug 31, 2018 10:50 am
Perhaps not years ago but lately CD rates are rising high and I got some CDs with over 3% interest rate. I have a CD ladder and the 5 year CD interest rate is 3.5%. I wanted some money to be in safe investments and to me, the interest rates made it worthwhile. And I felt CDs were safer than bond funds. But some people say CDs are not an investment, just a way to save money.
Who says that CDs are not an investment? Why?

In my opinion CDs are an investment, and can be an appropriate part of a fixed income (bond) allocation.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

neveragain
Posts: 252
Joined: Mon May 29, 2017 3:01 pm

Re: Are CDs considered an investment?

Post by neveragain » Fri Aug 31, 2018 11:37 am

ruralavalon wrote:
Fri Aug 31, 2018 11:36 am
neveragain wrote:
Fri Aug 31, 2018 10:50 am
Perhaps not years ago but lately CD rates are rising high and I got some CDs with over 3% interest rate. I have a CD ladder and the 5 year CD interest rate is 3.5%. I wanted some money to be in safe investments and to me, the interest rates made it worthwhile. And I felt CDs were safer than bond funds. But some people say CDs are not an investment, just a way to save money.
Who says that CDs are not an investment? Why?

In my opinion CDs are an investment, and can be an appropriate part of a fixed income (bond) allocation.
Thanks.

sport
Posts: 7491
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: Are CDs considered an investment?

Post by sport » Fri Aug 31, 2018 11:42 am

stimulacra wrote:
Fri Aug 31, 2018 11:08 am
neveragain wrote:
Fri Aug 31, 2018 11:03 am
WhiteMaxima wrote:
Fri Aug 31, 2018 11:02 am
CD is not an investment. It is just a piggy back for adult. A bank issues CD is an investment: paying less for deposit and lend same money at high rate to make the difference. I would buy dividend paying bank stock. The spread the risk, I will buy different bank stocks.
How much interest would a CD need to pay out for you to consider it more of an investment?
Trying to seek equity like returns from CDs is missing the point I feel like. That's not why one would buy CDs.

I think at one point Stanford International Bank's CDs were paying out 7.45% interest… I would say it was a poor investment.
I have an old bank statement showing CD interest of 14.3%. I saved it as a souvenir.

RickBoglehead
Posts: 1215
Joined: Wed Feb 14, 2018 9:10 am

Re: Are CDs considered an investment?

Post by RickBoglehead » Fri Aug 31, 2018 12:44 pm

neveragain wrote:
Fri Aug 31, 2018 10:50 am
But some people say CDs are not an investment, just a way to save money.
1) Stop listening to "some people". Sounds like a retiree community in Florida (could hear these words come out of my mother's mouth).

2) CDs are an investment just like any other investment. Don't pay any attention to others.

RickBoglehead
Posts: 1215
Joined: Wed Feb 14, 2018 9:10 am

Re: Are CDs considered an investment?

Post by RickBoglehead » Fri Aug 31, 2018 12:46 pm

WhiteMaxima wrote:
Fri Aug 31, 2018 11:02 am
CD is not an investment. It is just a piggy back for adult. A bank issues CD is an investment: paying less for deposit and lend same money at high rate to make the difference. I would buy dividend paying bank stock. The spread the risk, I will buy different bank stocks.
A piggy back?

I would never buy a bank stock.

It's an investment.

WhiteMaxima
Posts: 1496
Joined: Thu May 19, 2016 5:04 pm

Re: Are CDs considered an investment?

Post by WhiteMaxima » Fri Aug 31, 2018 12:56 pm

RickBoglehead wrote:
Fri Aug 31, 2018 12:46 pm
WhiteMaxima wrote:
Fri Aug 31, 2018 11:02 am
CD is not an investment. It is just a piggy back for adult. A bank issues CD is an investment: paying less for deposit and lend same money at high rate to make the difference. I would buy dividend paying bank stock. The spread the risk, I will buy different bank stocks.
A piggy back?

I would never buy a bank stock.

It's an investment.
yes it is a piggy bank, a place to park your paper money, not a place to make money.

User avatar
Phineas J. Whoopee
Posts: 7696
Joined: Sun Dec 18, 2011 6:18 pm

Re: Are CDs considered an investment?

Post by Phineas J. Whoopee » Fri Aug 31, 2018 1:04 pm

All the many threads on this topic ever amount to is an unresolved argument over the definition of the word investment.
PJW

chevca
Posts: 1940
Joined: Wed Jul 26, 2017 11:22 am

Re: Are CDs considered an investment?

Post by chevca » Fri Aug 31, 2018 1:33 pm

WhiteMaxima wrote:
Fri Aug 31, 2018 12:56 pm
RickBoglehead wrote:
Fri Aug 31, 2018 12:46 pm
WhiteMaxima wrote:
Fri Aug 31, 2018 11:02 am
CD is not an investment. It is just a piggy back for adult. A bank issues CD is an investment: paying less for deposit and lend same money at high rate to make the difference. I would buy dividend paying bank stock. The spread the risk, I will buy different bank stocks.
A piggy back?

I would never buy a bank stock.

It's an investment.
yes it is a piggy bank, a place to park your paper money, not a place to make money.
You have quite an odd definition of investment.

You borrow the bank your money and get paid back interest. No one said they make the most money. But, how is that not making money on a CD?

I guess we don't need to claim the interest income earned on CDs then? :happy

User avatar
Abe
Posts: 1808
Joined: Fri Sep 18, 2009 5:24 pm
Location: Earth in the Milky Way Galaxy

Re: Are CDs considered an investment?

Post by Abe » Fri Aug 31, 2018 1:50 pm

From Investopedia:
In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or will later be sold at a higher price for a profit.
Slow and steady wins the race.

User avatar
LadyGeek
Site Admin
Posts: 49176
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Are CDs considered an investment?

Post by LadyGeek » Fri Aug 31, 2018 2:19 pm

cheese_breath wrote:
Fri Aug 31, 2018 11:15 am
I don't know, and I don't care.
For new investors, this is a reference to the latest stock market conditions. IOW, we don't know what the market is doing - it doesn't matter.

It's the name of the fund used as a benchmark in the 2018 Hedge Fund contest.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

User avatar
nisiprius
Advisory Board
Posts: 37056
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Are CDs considered an investment?

Post by nisiprius » Fri Aug 31, 2018 2:37 pm

Sure, they are an investment.

"Savings" are money that you earn, but do not spend.

"Investments" are any place you put money that you have saved, with the reasonable expectation of future gain.

CDs meet any reasonable definition of "investment."

"Investment" has nothing to do with how much money you expect to earn. "Investment" does not necessarily mean "risky investment" nor does it necessarily mean "high-earning investment," it just means "investment."

Things get confused because at times and places, depending on state and federal laws, there were and are actual legal differences (which I don't understand) between "commercial banks," "savings banks," and "savings and loan institutions." The word "savings" has come to be associated with thrift, and to mean "a low-risk place to put your savings." At the other hand, the actual legal name for a mutual fund is "investment company," and generally "investments" carries the ring of dignity and wealth. Imagine if "Fidelity Investments" called itself "Fooling-Around Gambles."

P.S. (At least) three kinds of firm battle for your money: banks, insurance companies, and investment firms (dealing mostly in "securities," i.e. stocks, bonds, and mutual funds that hold stocks and bonds). Things will be a lot clearer if you focus on "what kind of firm is saying this, and what are the other kinds of firm it is competing with. They will do their best not to make this clear. Some insurance company add that shows people walking down lighted pathways that predict that their money will only last 12 years in retirement doesn't say "Please give your money to an insurance company, not a bank and not a mutual fund." They just say "let's plan on money that lasts all your years in retirement." Investment firms are likely to draw a false distinction between bank accounts and "investments," and, in particular, to gloss over the differences between "cash" in a bank account earning interest, and "cash" in the sense of literal paper currency.
Last edited by nisiprius on Fri Aug 31, 2018 2:46 pm, edited 3 times in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

User avatar
welderwannabe
Posts: 827
Joined: Fri Jun 16, 2017 8:32 am

Re: Are CDs considered an investment?

Post by welderwannabe » Fri Aug 31, 2018 2:39 pm

I would consider any CD of a term of 1 year or longer an investment. Any CD less than that I consider cash.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.

User avatar
ruralavalon
Posts: 14254
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Are CDs considered an investment?

Post by ruralavalon » Fri Aug 31, 2018 3:09 pm

neveragain wrote:
Fri Aug 31, 2018 10:50 am
Perhaps not years ago but lately CD rates are rising high and I got some CDs with over 3% interest rate. I have a CD ladder and the 5 year CD interest rate is 3.5%. I wanted some money to be in safe investments and to me, the interest rates made it worthwhile. And I felt CDs were safer than bond funds. But some people say CDs are not an investment, just a way to save money.
Abe wrote:
Fri Aug 31, 2018 1:50 pm
From Investopedia:
In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or will later be sold at a higher price for a profit.
I think that's a reasonable definition.

A year or two ago I would say that a CD or a money market fund was virtually guaranteed to give a negative real return, net of inflation. In other words not a good investment.

Now rates are higher, in the general range of the Federal Reserve Open Markets Committee's inflation target, so that's no longer necessarily true.

I suspect that what the "some people" referred to meant was that CDs were not a good investrent, not that CDs are not an investments all.
Last edited by ruralavalon on Fri Aug 31, 2018 3:11 pm, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

User avatar
DaftInvestor
Posts: 4091
Joined: Wed Feb 19, 2014 10:11 am

Re: Are CDs considered an investment?

Post by DaftInvestor » Fri Aug 31, 2018 3:10 pm

toe-may-toe toe-mah-toe

... and I don't care if I can't remember what the "A" in IRA stands for either ....
:happy

Call_Me_Op
Posts: 7067
Joined: Mon Sep 07, 2009 2:57 pm
Location: Milky Way

Re: Are CDs considered an investment?

Post by Call_Me_Op » Fri Aug 31, 2018 3:32 pm

Any item purchased (or otherwise acquired) with the expectation of interest, income, or increase in value is an investment. By this definition, a CD is an investment.

We cannot debate this without defining the term. If you do not like the definition I have provided above, provide a different one - but it is pointless to argue about a term you have not defined.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

User avatar
Artful Dodger
Posts: 495
Joined: Thu Oct 20, 2016 12:56 pm

Re: Are CDs considered an investment?

Post by Artful Dodger » Fri Aug 31, 2018 3:50 pm

neveragain wrote:
Fri Aug 31, 2018 10:50 am
Perhaps not years ago but lately CD rates are rising high and I got some CDs with over 3% interest rate. I have a CD ladder and the 5 year CD interest rate is 3.5%. I wanted some money to be in safe investments and to me, the interest rates made it worthwhile. And I felt CDs were safer than bond funds. But some people say CDs are not an investment, just a way to save money.
Do you care? Maybe you're just getting hung up on the term?

There are all kinds of investments - bonds, stocks / equities, real estate, commodities, art, wine, and i'm sure there are more. On this board, you mostly find holders of bonds and stocks, usually in funds, usually in index funds. I think most people consider cash less an investment, and more a safe holding to cover short term needs, weather a storm, or to possibly rebalance if there is an equity downturn.

But, most cash gets some "investment" return. 1/2% to 1&1/2% on money market funds; 2%~ on 6 month CDs. I consider my CDs with durations greater than a year to be bonds, less than one year to be cash.

I tend to agree with your statement regarding CDs vs bond funds. As long as the Fed is raising rates, bond fund total return will be depressed.

User avatar
LadyGeek
Site Admin
Posts: 49176
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Are CDs considered an investment?

Post by LadyGeek » Fri Aug 31, 2018 4:03 pm

neveragain wrote:
Fri Aug 31, 2018 10:50 am
But some people say CDs are not an investment, just a way to save money.
I'll bet "some people" are similar to what my Dad thought me - that banks had 3 things: checking, savings, and CDs. Everything else was an "investment", meaning stocks and bonds, and they all lose money. Banks never lose money, so save your money there.

I didn't know anything differently until much later in life.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

neveragain
Posts: 252
Joined: Mon May 29, 2017 3:01 pm

Re: Are CDs considered an investment?

Post by neveragain » Fri Aug 31, 2018 4:30 pm

ruralavalon wrote:
Fri Aug 31, 2018 3:09 pm
A year or two ago I would say that a CD or a money market fund was virtually guaranteed to give a negative real return, net of inflation. In other words not a good investment.
That's why I didn't consider CDs last year at all. Now I'm wondering if the rates will go up even higher. Considering all the information I've learned so far, I probably won't take out any more CDs though.

MikeG62
Posts: 1219
Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

Re: Are CDs considered an investment?

Post by MikeG62 » Fri Aug 31, 2018 4:32 pm

I would say yes. CD’s could fill the short-term end of your fixed income allocation.
Real Knowledge Comes Only From Experience

User avatar
nisiprius
Advisory Board
Posts: 37056
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Are CDs considered an investment?

Post by nisiprius » Fri Aug 31, 2018 4:51 pm

Maybe people won't mind me posting this again:

Image

In case people don't recognize it, that's what a CD once looked like. It is in the form of a "bankbook." About the size of a passport, and when you brought to the bank they physically inserted it into something like an adding machine on steroids. It was able to remember the position of the last line, so that it knew where to print the new line, by physically punching notches at the edge.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

User avatar
cheese_breath
Posts: 8083
Joined: Wed Sep 14, 2011 7:08 pm

Re: Are CDs considered an investment?

Post by cheese_breath » Fri Aug 31, 2018 5:22 pm

WhiteMaxima wrote:
Fri Aug 31, 2018 12:56 pm
RickBoglehead wrote:
Fri Aug 31, 2018 12:46 pm
WhiteMaxima wrote:
Fri Aug 31, 2018 11:02 am
CD is not an investment. It is just a piggy back for adult. A bank issues CD is an investment: paying less for deposit and lend same money at high rate to make the difference. I would buy dividend paying bank stock. The spread the risk, I will buy different bank stocks.
A piggy back?

I would never buy a bank stock.

It's an investment.
yes it is a piggy bank, a place to park your paper money, not a place to make money.
DO piggy banks pay interest? Can they be FDIC insured?
The surest way to know the future is when it becomes the past.

neveragain
Posts: 252
Joined: Mon May 29, 2017 3:01 pm

Re: Are CDs considered an investment?

Post by neveragain » Fri Aug 31, 2018 5:53 pm

nisiprius wrote:
Fri Aug 31, 2018 4:51 pm
Maybe people won't mind me posting this again:

Image

In case people don't recognize it, that's what a CD once looked like. It is in the form of a "bankbook." About the size of a passport, and when you brought to the bank they physically inserted it into something like an adding machine on steroids. It was able to remember the position of the last line, so that it knew where to print the new line, by physically punching notches at the edge.
That was a good rate of return. Was that typical in 1982 - 83?

User avatar
Duckie
Posts: 6069
Joined: Thu Mar 08, 2007 2:55 pm

Re: Are CDs considered an investment?

Post by Duckie » Fri Aug 31, 2018 6:05 pm

neveragain wrote:Are CDs considered an investment?
It depends on their purpose. If they are part of your emergency fund or house down-payment fund then they are savings. If they are part of the fixed income portion of your retirement portfolio then they are an investment.

User avatar
nisiprius
Advisory Board
Posts: 37056
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Are CDs considered an investment?

Post by nisiprius » Fri Aug 31, 2018 6:13 pm

neveragain wrote:
Fri Aug 31, 2018 5:53 pm
That was a good rate of return. Was that typical in 1982 - 83?
Ah. That old devil, money illusion.

It was typical in 1982-83.

But it wasn't a necessarily very good rate of return. Because inflation had been running at 12-13% per year.

More precisely, yes, it was a good rate of return in 1982, because bank rates did lag the inflation rate considerably. Due to the lag, bank rates were awful, relative to inflation, as inflation was spiking, and briefly good, relative to inflation, when it was cooling off.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

neveragain
Posts: 252
Joined: Mon May 29, 2017 3:01 pm

Re: Are CDs considered an investment?

Post by neveragain » Fri Aug 31, 2018 6:19 pm

nisiprius wrote:
Fri Aug 31, 2018 6:13 pm
neveragain wrote:
Fri Aug 31, 2018 5:53 pm
That was a good rate of return. Was that typical in 1982 - 83?
Ah. That old devil, money illusion.

It was typical in 1982-83.

But it wasn't a necessarily very good rate of return. Because inflation had been running at 12-13% per year.

More precisely, yes, it was a good rate of return in 1982, because bank rates did lag the inflation rate considerably. Due to the lag, bank rates were awful, relative to inflation, as inflation was spiking, and briefly good, relative to inflation, when it was cooling off.
OK. Had no idea inflation was so high back then.

stimulacra
Posts: 380
Joined: Wed Dec 21, 2016 3:50 pm
Location: Houston

Re: Are CDs considered an investment?

Post by stimulacra » Fri Aug 31, 2018 6:36 pm

sport wrote:
Fri Aug 31, 2018 11:42 am
stimulacra wrote:
Fri Aug 31, 2018 11:08 am
neveragain wrote:
Fri Aug 31, 2018 11:03 am
WhiteMaxima wrote:
Fri Aug 31, 2018 11:02 am
CD is not an investment. It is just a piggy back for adult. A bank issues CD is an investment: paying less for deposit and lend same money at high rate to make the difference. I would buy dividend paying bank stock. The spread the risk, I will buy different bank stocks.
How much interest would a CD need to pay out for you to consider it more of an investment?
Trying to seek equity like returns from CDs is missing the point I feel like. That's not why one would buy CDs.

I think at one point Stanford International Bank's CDs were paying out 7.45% interest… I would say it was a poor investment.
I have an old bank statement showing CD interest of 14.3%. I saved it as a souvenir.
Was that back when mortgages were 16% and inflation was just as high?

User avatar
cheese_breath
Posts: 8083
Joined: Wed Sep 14, 2011 7:08 pm

Re: Are CDs considered an investment?

Post by cheese_breath » Fri Aug 31, 2018 6:39 pm

neveragain wrote:
Fri Aug 31, 2018 6:19 pm
nisiprius wrote:
Fri Aug 31, 2018 6:13 pm
neveragain wrote:
Fri Aug 31, 2018 5:53 pm
That was a good rate of return. Was that typical in 1982 - 83?
Ah. That old devil, money illusion.

It was typical in 1982-83.

But it wasn't a necessarily very good rate of return. Because inflation had been running at 12-13% per year.

More precisely, yes, it was a good rate of return in 1982, because bank rates did lag the inflation rate considerably. Due to the lag, bank rates were awful, relative to inflation, as inflation was spiking, and briefly good, relative to inflation, when it was cooling off.
OK. Had no idea inflation was so high back then.
It peaked at 14.76% in April 1980. https://inflationdata.com/articles/infl ... 1980-1989/
The surest way to know the future is when it becomes the past.

2015
Posts: 2170
Joined: Mon Feb 10, 2014 2:32 pm

Re: Are CDs considered an investment?

Post by 2015 » Fri Aug 31, 2018 6:40 pm

nisiprius wrote:
Fri Aug 31, 2018 6:13 pm
neveragain wrote:
Fri Aug 31, 2018 5:53 pm
That was a good rate of return. Was that typical in 1982 - 83?
Ah. That old devil, money illusion.

It was typical in 1982-83.

But it wasn't a necessarily very good rate of return. Because inflation had been running at 12-13% per year.

More precisely, yes, it was a good rate of return in 1982, because bank rates did lag the inflation rate considerably. Due to the lag, bank rates were awful, relative to inflation, as inflation was spiking, and briefly good, relative to inflation, when it was cooling off.
Oh my. Brings back memories.

I remember a friend's husband was a broker working for Franklin Investments (pre Franklin Templeton!). He told our circle how Franklin's money fund was paying something like 18%, IIRC, so naturally we all piled in. Of course, inflation was still through the roof in 1982, and being my young naive self, I chose that very year to finance a brand new Mazda RX7 through Bank of America. Had an insanely high interest rate. It didn't matter, though, because I was a young overconfident buck making more money (not in finance) than anyone I knew. Until I no longer did. Life's lessons. Still, I loved that car and kept it for 10 great years.

BTW, that passbook looks like it belongs in a museum! I haven't heard the term passbook in so long.

User avatar
Artsdoctor
Posts: 3595
Joined: Thu Jun 28, 2012 3:09 pm
Location: Los Angeles, CA

Re: Are CDs considered an investment?

Post by Artsdoctor » Fri Aug 31, 2018 7:49 pm

nisiprius wrote:
Fri Aug 31, 2018 4:51 pm
Maybe people won't mind me posting this again:

Image

In case people don't recognize it, that's what a CD once looked like. It is in the form of a "bankbook." About the size of a passport, and when you brought to the bank they physically inserted it into something like an adding machine on steroids. It was able to remember the position of the last line, so that it knew where to print the new line, by physically punching notches at the edge.
Wow. That was pretty good and well above the inflation rate noted here:

https://www.inflation.eu/inflation-rate ... -1982.aspx

User avatar
Artsdoctor
Posts: 3595
Joined: Thu Jun 28, 2012 3:09 pm
Location: Los Angeles, CA

Re: Are CDs considered an investment?

Post by Artsdoctor » Fri Aug 31, 2018 7:57 pm

Abe wrote:
Fri Aug 31, 2018 1:50 pm
From Investopedia:
In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or will later be sold at a higher price for a profit.
I don't really think there's much of an argument here. That definition pretty much sums it up.

However, you should be aware that some people nowadays believe that facts and truth are negotiable or open to interpretation. Consequently, I'm not surprised you have someone here that actually believes that a CD is not an investment.

User avatar
LadyGeek
Site Admin
Posts: 49176
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Are CDs considered an investment?

Post by LadyGeek » Fri Aug 31, 2018 8:00 pm

This thread is now in the Investing - Theory, News & General forum (general discussion).
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

WildBill
Posts: 393
Joined: Wed Jun 29, 2016 10:47 pm
Location: San Antonio, Texas

Re: Are CDs considered an investment?

Post by WildBill » Fri Aug 31, 2018 8:04 pm

Howdy

I think the question is re the definition of an “investment”.

Benjamin Graham, along with David Dodd, attempted a precise definition of investing and speculation in their seminal work Security Analysis (1934).

“An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.”

Mr. Graham knew a lot of stuff, and he passed a lot of it on to Warren Buffet, among others, so he is a man to listen to.

Of course CD s are investments.

Happy compounding

W B
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid

lukestuckenhymer
Posts: 82
Joined: Wed May 30, 2018 11:53 am

Re: Are CDs considered an investment?

Post by lukestuckenhymer » Fri Aug 31, 2018 11:21 pm

Yes a CD is an investment.

Whole Life insurance is not an investment.

Nate79
Posts: 3718
Joined: Thu Aug 11, 2016 6:24 pm
Location: Delaware

Re: Are CDs considered an investment?

Post by Nate79 » Fri Aug 31, 2018 11:40 pm

lukestuckenhymer wrote:
Fri Aug 31, 2018 11:21 pm
Yes a CD is an investment.

Whole Life insurance is not an investment.
+1

Whole life is trash. Trash is not an investment. Thus WL is not an investment. :D

User avatar
watchnerd
Posts: 1432
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: Are CDs considered an investment?

Post by watchnerd » Sat Sep 01, 2018 12:30 am

Artful Dodger wrote:
Fri Aug 31, 2018 3:50 pm
neveragain wrote:
Fri Aug 31, 2018 10:50 am
Perhaps not years ago but lately CD rates are rising high and I got some CDs with over 3% interest rate. I have a CD ladder and the 5 year CD interest rate is 3.5%. I wanted some money to be in safe investments and to me, the interest rates made it worthwhile. And I felt CDs were safer than bond funds. But some people say CDs are not an investment, just a way to save money.
Do you care? Maybe you're just getting hung up on the term?
I agree, this seems like a semantics argument.

Unlike talking about whether a primary home is a utility good, physical inflationary hedge, or investment, which is a far more complex discussion.
Tax Sheltered: 35% US Stock | 35% ex-US Stock | 30% TTM || Taxable: 35% US Stock | 35% ex-US Stock | 15% TTM | 15% Munis

moneywise3
Posts: 391
Joined: Mon Nov 22, 2010 6:54 pm

Re: Are CDs considered an investment?

Post by moneywise3 » Sat Sep 01, 2018 3:55 am

Define investment.

Based on many people's definition, stock market participation is not an investment, it's gambling.

For some people putting money away in a mattress maybe an investment. Playing lottery might be an investment too for some!

Nissanzx1
Posts: 348
Joined: Wed Jul 18, 2018 11:13 pm

Re: Are CDs considered an investment?

Post by Nissanzx1 » Sat Sep 01, 2018 4:55 am

I would never buy a bank stock.

[/quote]

Bank stock can be a sweet deal. I know someone who invested about $100K 30 years ago in a small local bank and the stock is now worth $1.1M and its spins off $33K every quarter in dividends and has for years now.

ivk5
Posts: 479
Joined: Thu Sep 22, 2016 9:05 am

Re: Are CDs considered an investment?

Post by ivk5 » Sat Sep 01, 2018 6:01 am

Nissanzx1 wrote:
Sat Sep 01, 2018 4:55 am
I would never buy a bank stock.
Bank stock can be a sweet deal. I know someone who invested about $100K 30 years ago in a small local bank and the stock is now worth $1.1M and its spins off $33K every quarter in dividends and has for years now.
OT but I thought by “sweet deal” you might mean superior risk-adjusted return (concentration risk notwithstanding). Is there actually any basis to think that?

User avatar
watchnerd
Posts: 1432
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: Are CDs considered an investment?

Post by watchnerd » Sat Sep 01, 2018 8:15 am

I think I understand the confusion now.....

Certificates of Deposit = Investment

Compact Disks = Speculation
Tax Sheltered: 35% US Stock | 35% ex-US Stock | 30% TTM || Taxable: 35% US Stock | 35% ex-US Stock | 15% TTM | 15% Munis

User avatar
ruralavalon
Posts: 14254
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Are CDs considered an investment?

Post by ruralavalon » Sat Sep 01, 2018 8:44 am

neveragain wrote:
Fri Aug 31, 2018 5:53 pm
nisiprius wrote:
Fri Aug 31, 2018 4:51 pm
Maybe people won't mind me posting this again:

Image

In case people don't recognize it, that's what a CD once looked like. It is in the form of a "bankbook." About the size of a passport, and when you brought to the bank they physically inserted it into something like an adding machine on steroids. It was able to remember the position of the last line, so that it knew where to print the new line, by physically punching notches at the edge.
That was a good rate of return. Was that typical in 1982 - 83?
The interest rate is not so good when you consider that the inflation rate for the proceeding year, 1981, was 10.32%.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Post Reply