Should I wait to invest in CDs?

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mj11711
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Should I wait to invest in CDs?

Post by mj11711 »

The fed just raised the rates today and signaled another interest arte increase before year's end. I have about $150k in cash that I am willing to put into a CD for 3 years or so. Should I do that now (I see the returns are around 3% now) or wait until years end, next year when returns are higher - are the CD rates going to go up along with the fed rate hikes?

Not sure what else to invest in at a time like this. My 401ks and stock/index fund portflios got butchered last 2 years.
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JoeRetire
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Re: Should I wait to invest in CDs?

Post by JoeRetire »

mj11711 wrote: Wed Sep 21, 2022 1:48 pmare the CD rates going to go up along with the fed rate hikes?
Maybe.

One thing is sure - your cash is earning 0%
Oh, noooooo! I'm so sorry, it's the moops! The correct answer is 'the moops'.
yules
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Re: Should I wait to invest in CDs?

Post by yules »

mj11711 wrote: Wed Sep 21, 2022 1:48 pm Not sure what else to invest in at a time like this. My 401ks and stock/index fund portflios got butchered last 2 years.
Based on this info, you should put your cash to stocks so that you rebalance!

Yules
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galawdawg
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Re: Should I wait to invest in CDs?

Post by galawdawg »

I'm seeing these rates at Schwab:

1 yr CD 4.00%
2 yr CD 4.10%
3 yr CD 4.20%

1 yr Treasury 4.14%
2 yr Treasury 4.08%
3 yr Treasury 4.03%

If you are concerned about rates rising after you lock-in a CD or Treasury for three years, consider a CD/Treasury ladder. $50k in a 1 yr Treasury, $50k in a 2 yr CD/Treasury and $50k in a 3 yr CD/Treasury. (Note: Treasuries are exempt from state and local taxes so your after-tax rate on the two and three year treasuries may actually be higher than the two and three year CDs, depending on your state and local tax rates).
Topic Author
mj11711
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Re: Should I wait to invest in CDs?

Post by mj11711 »

I have been playing the stock market and am done with that at this point because I lost so much I do not even want to say it. I do still hold a soft spot for VTSMX but I kept buying this year when I thought it wasnt goign to go down any more and got royally screwed a few times ...not sure I want to keep buying into it now.... is the stock market supposed to go up from here?
Topic Author
mj11711
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Re: Should I wait to invest in CDs?

Post by mj11711 »

Never did treasuries- whats the easiest way to buy them? I have accounts with Vanguard, Fidelity and Ally bank.

galawdawg wrote: Wed Sep 21, 2022 2:01 pm I'm seeing these rates at Schwab:

1 yr CD 4.00%
2 yr CD 4.10%
3 yr CD 4.20%

1 yr Treasury 4.14%
2 yr Treasury 4.08%
3 yr Treasury 4.03%

If you are concerned about rates rising after you lock-in a CD or Treasury for three years, consider a CD/Treasury ladder. $50k in a 1 yr Treasury, $50k in a 2 yr CD/Treasury and $50k in a 3 yr CD/Treasury. (Note: Treasuries are exempt from state and local taxes so your after-tax rate on the two and three year treasuries may actually be higher than the two and three year CDs, depending on your state and local tax rates).
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galawdawg
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Re: Should I wait to invest in CDs?

Post by galawdawg »

mj11711 wrote: Wed Sep 21, 2022 2:02 pm I have been playing the stock market and am done with that at this point because I lost so much I do not even want to say it. I do still hold a soft spot for VTSMX but I kept buying this year when I thought it wasnt goign to go down any more and got royally screwed a few times ...not sure I want to keep buying into it now.... is the stock market supposed to go up from here?
You've been on Bogleheads since 2015? What have you been reading here that led you to "play" the stock market and be so confident that you could accurately predict that "it wasn't going to go down anymore" that you bought more? :oops: The results of a wise approach to investing in equities isn't measured in days, months or years but rather in decades.

To answer your question, yes, the stock market is supposed to go up from here. When? Who knows. Could be tomorrow, could be in 2030.

If you haven't yet done so, take a look at the Wiki, particularly on the Boglehead investing philosophy and on asset allocation as well. If you can't "stay the course" you need to rethink your risk tolerance. There are other options besides "all in" and "all out"! :beer
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galawdawg
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Re: Should I wait to invest in CDs?

Post by galawdawg »

mj11711 wrote: Wed Sep 21, 2022 2:03 pm Never did treasuries- whats the easiest way to buy them? I have accounts with Vanguard, Fidelity and Ally bank.
This is an excellent thread on buying treasuries: viewtopic.php?t=378350
student
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Re: Should I wait to invest in CDs?

Post by student »

How about 3-month t-bill and reevaluate in 3 months. Here is a good guide. https://thefinancebuff.com/treasury-bil ... arket.html
homebuyer6426
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Re: Should I wait to invest in CDs?

Post by homebuyer6426 »

I bought some CDs a while ago at 3%. I bought more recently at 4%. I wouldn't wait to invest in CDs because I select the CD's length to correspond with when I expect to need the money.
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arcticpineapplecorp.
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Re: Should I wait to invest in CDs?

Post by arcticpineapplecorp. »

mj11711 wrote: Wed Sep 21, 2022 2:02 pm I have been playing the stock market and am done with that at this point because I lost so much I do not even want to say it. I do still hold a soft spot for VTSMX but I kept buying this year when I thought it wasnt goign to go down any more and got royally screwed a few times ...not sure I want to keep buying into it now.... is the stock market supposed to go up from here?
i suggest you read the following:
Getting Started
and
Bogleheads Investment Philosophy

but definitely these:
Never Try to Time the Market, Stay The Course

Develop a workable plan, Never Bear too much or too little risk

And read this:

How much risk do you need to take: https://www.cbsnews.com/news/asset-allo ... -you-need/
How much risk do you have the ability to take: https://www.cbsnews.com/news/asset-allo ... -you-take/
How much risk do you have the willingness to take: https://www.cbsnews.com/news/asset-allo ... tolerance/
How to deal with conflicts between the need, ability and willingness to take risk: https://www.cbsnews.com/news/asset-allo ... ing-goals/
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
Topic Author
mj11711
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Re: Should I wait to invest in CDs?

Post by mj11711 »

homebuyer6426 wrote: Wed Sep 21, 2022 2:13 pm I bought some CDs a while ago at 3%. I bought more recently at 4%. I wouldn't wait to invest in CDs because I select the CD's length to correspond with when I expect to need the money.
Where are you getting CD rates at 4%? The highest im seeing is 3% at 5 year...
CletusCaddy
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Re: Should I wait to invest in CDs?

Post by CletusCaddy »

mj11711 wrote: Wed Sep 21, 2022 2:25 pm
homebuyer6426 wrote: Wed Sep 21, 2022 2:13 pm I bought some CDs a while ago at 3%. I bought more recently at 4%. I wouldn't wait to invest in CDs because I select the CD's length to correspond with when I expect to need the money.
Where are you getting CD rates at 4%? The highest im seeing is 3% at 5 year...
https://www.savebetter.com/cd-accounts
jebmke
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Location: Delmarva Peninsula

Re: Should I wait to invest in CDs?

Post by jebmke »

mj11711 wrote: Wed Sep 21, 2022 2:25 pm
homebuyer6426 wrote: Wed Sep 21, 2022 2:13 pm I bought some CDs a while ago at 3%. I bought more recently at 4%. I wouldn't wait to invest in CDs because I select the CD's length to correspond with when I expect to need the money.
Where are you getting CD rates at 4%? The highest im seeing is 3% at 5 year...
Vanguard is showing 4%+ on various maturities; I looked quickly just now and above 6 months there are offerings of 4% and higher in some cases. I suspect all the brokerages show similar results.
When you discover that you are riding a dead horse, the best strategy is to dismount.
Katietsu
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Re: Should I wait to invest in CDs?

Post by Katietsu »

mj11711 wrote: Wed Sep 21, 2022 2:03 pm Never did treasuries- whats the easiest way to buy them? I have accounts with Vanguard, Fidelity and Ally bank.

galawdawg wrote: Wed Sep 21, 2022 2:01 pm I'm seeing these rates at Schwab:

1 yr CD 4.00%
2 yr CD 4.10%
3 yr CD 4.20%

1 yr Treasury 4.14%
2 yr Treasury 4.08%
3 yr Treasury 4.03%

If you are concerned about rates rising after you lock-in a CD or Treasury for three years, consider a CD/Treasury ladder. $50k in a 1 yr Treasury, $50k in a 2 yr CD/Treasury and $50k in a 3 yr CD/Treasury. (Note: Treasuries are exempt from state and local taxes so your after-tax rate on the two and three year treasuries may actually be higher than the two and three year CDs, depending on your state and local tax rates).
I would use Fidelity of those three based on the discussions on this board. You can buy on the secondary market. Or you can put in an order for an auction. If you choose the auction, you may also choose auto roll if you want. See the long thread started by Kevin M for buying treasuries.

Or just buy a fund or money market that invests in treasuries.
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arcticpineapplecorp.
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Re: Should I wait to invest in CDs?

Post by arcticpineapplecorp. »

CletusCaddy wrote: Wed Sep 21, 2022 2:38 pm
mj11711 wrote: Wed Sep 21, 2022 2:25 pm
homebuyer6426 wrote: Wed Sep 21, 2022 2:13 pm I bought some CDs a while ago at 3%. I bought more recently at 4%. I wouldn't wait to invest in CDs because I select the CD's length to correspond with when I expect to need the money.
Where are you getting CD rates at 4%? The highest im seeing is 3% at 5 year...
https://www.savebetter.com/cd-accounts
did you read the fine print:
Powered by
Each customer authorizes the Custodial Bank to hold the customer’s funds in a custodial capacity in order to facilitate the
customer’s deposits to and withdrawals from any product at Axiom Bank that the customer requests through SaveBetter.com.
The Custodial Bank does not establish the terms of the deposit accounts or offer the deposit accounts to customers and
provides no advice to customers about deposit accounts at Axiom Bank. Lewis and Clark Bank, Member FDIC, is the
Custodial Bank
.
while axiom is rated A+ (https://www.depositaccounts.com/banks/axiom-bank.html), the custodial bank, that is, Lewis and Clark is rated B+ (https://www.depositaccounts.com/banks/l ... -bank.html)
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
CletusCaddy
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Joined: Sun Sep 12, 2021 4:23 am

Re: Should I wait to invest in CDs?

Post by CletusCaddy »

arcticpineapplecorp. wrote: Wed Sep 21, 2022 3:02 pm
CletusCaddy wrote: Wed Sep 21, 2022 2:38 pm
mj11711 wrote: Wed Sep 21, 2022 2:25 pm
homebuyer6426 wrote: Wed Sep 21, 2022 2:13 pm I bought some CDs a while ago at 3%. I bought more recently at 4%. I wouldn't wait to invest in CDs because I select the CD's length to correspond with when I expect to need the money.
Where are you getting CD rates at 4%? The highest im seeing is 3% at 5 year...
https://www.savebetter.com/cd-accounts
did you read the fine print:
Powered by
Each customer authorizes the Custodial Bank to hold the customer’s funds in a custodial capacity in order to facilitate the
customer’s deposits to and withdrawals from any product at Axiom Bank that the customer requests through SaveBetter.com.
The Custodial Bank does not establish the terms of the deposit accounts or offer the deposit accounts to customers and
provides no advice to customers about deposit accounts at Axiom Bank. Lewis and Clark Bank, Member FDIC, is the
Custodial Bank
.
while axiom is rated A+ (https://www.depositaccounts.com/banks/axiom-bank.html), the custodial bank, that is, Lewis and Clark is rated B+ (https://www.depositaccounts.com/banks/l ... -bank.html)
FDIC insured is FDIC insured
02nz
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Re: Should I wait to invest in CDs?

Post by 02nz »

As an example, if you could get an 18-month CD at 4% right now, but you instead keep it in a "high-yield" savings account earning 2%, then in 6 months' time you need to find a 12-month CD that earns more than 5% in order to come out ahead. That's a much higher threshold than just holding out for a higher rate.
investor4life
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Re: Should I wait to invest in CDs?

Post by investor4life »

mj11711 wrote: Wed Sep 21, 2022 2:03 pm Never did treasuries- whats the easiest way to buy them? I have accounts with Vanguard, Fidelity and Ally bank.

galawdawg wrote: Wed Sep 21, 2022 2:01 pm I'm seeing these rates at Schwab:

1 yr CD 4.00%
2 yr CD 4.10%
3 yr CD 4.20%

1 yr Treasury 4.14%
2 yr Treasury 4.08%
3 yr Treasury 4.03%

If you are concerned about rates rising after you lock-in a CD or Treasury for three years, consider a CD/Treasury ladder. $50k in a 1 yr Treasury, $50k in a 2 yr CD/Treasury and $50k in a 3 yr CD/Treasury. (Note: Treasuries are exempt from state and local taxes so your after-tax rate on the two and three year treasuries may actually be higher than the two and three year CDs, depending on your state and local tax rates).
This is a good intro to buying Treasuries at various brokers.

https://thefinancebuff.com/treasury-bil ... arket.html
iflyjetzzz
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Re: Should I wait to invest in CDs?

Post by iflyjetzzz »

student wrote: Wed Sep 21, 2022 2:12 pm How about 3-month t-bill and reevaluate in 3 months. Here is a good guide. https://thefinancebuff.com/treasury-bil ... arket.html
I opted for the 8 week today; auction tomorrow. Should have a yield ~2.9%. The reason for that is that the next FOMC meeting is Nov 1-2 and I anticipate them raising rates another 75 BPS.
I also like the idea of Tresauries over CDs since they're very liquid and I'm just sitting on the sidelines looking for a spot to invest in equities.
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arcticpineapplecorp.
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Re: Should I wait to invest in CDs?

Post by arcticpineapplecorp. »

CletusCaddy wrote: Wed Sep 21, 2022 3:05 pm
arcticpineapplecorp. wrote: Wed Sep 21, 2022 3:02 pm
CletusCaddy wrote: Wed Sep 21, 2022 2:38 pm
mj11711 wrote: Wed Sep 21, 2022 2:25 pm
homebuyer6426 wrote: Wed Sep 21, 2022 2:13 pm I bought some CDs a while ago at 3%. I bought more recently at 4%. I wouldn't wait to invest in CDs because I select the CD's length to correspond with when I expect to need the money.
Where are you getting CD rates at 4%? The highest im seeing is 3% at 5 year...
https://www.savebetter.com/cd-accounts
did you read the fine print:
Powered by
Each customer authorizes the Custodial Bank to hold the customer’s funds in a custodial capacity in order to facilitate the
customer’s deposits to and withdrawals from any product at Axiom Bank that the customer requests through SaveBetter.com.
The Custodial Bank does not establish the terms of the deposit accounts or offer the deposit accounts to customers and
provides no advice to customers about deposit accounts at Axiom Bank. Lewis and Clark Bank, Member FDIC, is the
Custodial Bank
.
while axiom is rated A+ (https://www.depositaccounts.com/banks/axiom-bank.html), the custodial bank, that is, Lewis and Clark is rated B+ (https://www.depositaccounts.com/banks/l ... -bank.html)
FDIC insured is FDIC insured
yes, i know that and i saw that too. but why have your money at any bank that is below a A rating if you don't have to? Just to get a little more interest?
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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Wiggums
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Re: Should I wait to invest in CDs?

Post by Wiggums »

We are buying another 13 week T-bill right now. In 2023, we will buy a much longer duration.
Investors need to be better informed about the costs they pay. “High fund fees can be hazardous to your wealth in the same way that high calories can be hazardous for your health.”
CletusCaddy
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Re: Should I wait to invest in CDs?

Post by CletusCaddy »

arcticpineapplecorp. wrote: Wed Sep 21, 2022 7:54 pm yes, i know that and i saw that too. but why have your money at any bank that is below a A rating if you don't have to? Just to get a little more interest?
I would say that the customer interface to SaveBetter is a much more important consideration than how solvent the custodian bank is. And on that point I have described the process to withdraw money on the other SaveBetter thread. Folks can decide for themselves whether that is an acceptable process to access their money or not.
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arcticpineapplecorp.
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Re: Should I wait to invest in CDs?

Post by arcticpineapplecorp. »

CletusCaddy wrote: Wed Sep 21, 2022 9:00 pm
arcticpineapplecorp. wrote: Wed Sep 21, 2022 7:54 pm yes, i know that and i saw that too. but why have your money at any bank that is below a A rating if you don't have to? Just to get a little more interest?
I would say that the customer interface to SaveBetter is a much more important consideration than how solvent the custodian bank is. And on that point I have described the process to withdraw money on the other SaveBetter thread. Folks can decide for themselves whether that is an acceptable process to access their money or not.
can you give a link to that thread because I didn't see it when i did a search at the search bar at the top right of this page.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
CletusCaddy
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Re: Should I wait to invest in CDs?

Post by CletusCaddy »

arcticpineapplecorp. wrote: Thu Sep 22, 2022 8:29 am
CletusCaddy wrote: Wed Sep 21, 2022 9:00 pm
arcticpineapplecorp. wrote: Wed Sep 21, 2022 7:54 pm yes, i know that and i saw that too. but why have your money at any bank that is below a A rating if you don't have to? Just to get a little more interest?
I would say that the customer interface to SaveBetter is a much more important consideration than how solvent the custodian bank is. And on that point I have described the process to withdraw money on the other SaveBetter thread. Folks can decide for themselves whether that is an acceptable process to access their money or not.
can you give a link to that thread because I didn't see it when i did a search at the search bar at the top right of this page.
viewtopic.php?t=381532
hudson
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Re: Should I wait to invest in CDs?

Post by hudson »

mj11711 wrote: Wed Sep 21, 2022 1:48 pm The fed just raised the rates today and signaled another interest arte increase before year's end. I have about $150k in cash that I am willing to put into a CD for 3 years or so. Should I do that now (I see the returns are around 3% now) or wait until years end, next year when returns are higher - are the CD rates going to go up along with the fed rate hikes?

Not sure what else to invest in at a time like this. My 401ks and stock/index fund portflios got butchered last 2 years.
If I had 150K today to invest, I wouldn't go as short as 3 years unless I needed the money in 3 years.
I'd buy individual treasuries half TIPS and half nominal.
How long would I go? I'd average out 10 years. When do you need the money?
Topic Author
mj11711
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Re: Should I wait to invest in CDs?

Post by mj11711 »

I don't need the money as I make a high income so just looking to park it somewhere where it yields the most amount of money for me. It looks like long term (10 year) treasuries have lower yield than short term so why would I do a 10 year? Especially when the yield is likely to go up in a year or so no?

What doe sit mean to buy individual treasuries half tips and half nominal?

Also, I saw that corporates (esp BBB) had the highest returns - are these risky/not recommended?

I am also considering just doing my usual and dumping the money into VTSMX especially since its been so beat down... but thats where majority of my money is and the stock market has been so up and down that I am not sure if its wise to do that especially at a time like this when treausry/cd rates are producing nice returns with no risk of loss.

[/quote]
If I had 150K today to invest, I wouldn't go as short as 3 years unless I needed the money in 3 years.
I'd buy individual treasuries half TIPS and half nominal.
How long would I go? I'd average out 10 years. When do you need the money?
[/quote]
hudson
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Re: Should I wait to invest in CDs?

Post by hudson »

mj11711 wrote: Fri Sep 23, 2022 8:55 am I don't need the money as I make a high income so just looking to park it somewhere where it yields the most amount of money for me. It looks like long term (10 year) treasuries have lower yield than short term so why would I do a 10 year? Especially when the yield is likely to go up in a year or so no?

What doe sit mean to buy individual treasuries half tips and half nominal?

Also, I saw that corporates (esp BBB) had the highest returns - are these risky/not recommended?

I am also considering just doing my usual and dumping the money into VTSMX especially since its been so beat down... but thats where majority of my money is and the stock market has been so up and down that I am not sure if its wise to do that especially at a time like this when treausry/cd rates are producing nice returns with no risk of loss.

Ten year treasuries lock in that rate for 10 years. Shorter term rates may not stay so high. viewtopic.php?p=6883119#p6883119

Half TIPS and half nominals? Half regular treasuries and half inflation protected treasuries. (No state taxes) As you already know, these are the safest options.

Corporates don't work for me...too risky. BBBs are very risky.
I like FDIC CDs, treasuries, and AAA/AA munis. There's more to say, but I'll stop there.

If you're younger, buying total stock market is good.
Last edited by hudson on Fri Sep 23, 2022 1:30 pm, edited 3 times in total.
Jeepergeo
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Re: Should I wait to invest in CDs?

Post by Jeepergeo »

mj11711 wrote: Wed Sep 21, 2022 1:48 pm The fed just raised the rates today and signaled another interest arte increase before year's end. I have about $150k in cash that I am willing to put into a CD for 3 years or so. Should I do that now (I see the returns are around 3% now) or wait until years end, next year when returns are higher - are the CD rates going to go up along with the fed rate hikes?

Not sure what else to invest in at a time like this. My 401ks and stock/index fund portflios got butchered last 2 years.
Wait at least a year. Then look back at what rates have been over the last year. You will then know the right answer.

Seriously, most folks here don't suggest market timing for stocks, so why do essentially the same with your cash?

Set a cash management strategy and then stick to it. Many go with ladders built through periodic purchases and roll overs at various maturities...though I suppose that is the same as DCA.

Good luck, and as others have pointed out, the cash is likely nearer to 0.0% than to 1.0%, so many of the current CDs are much better than the current earnings.
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