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  • Brains428
    replied
    Thanks for all the replies.  I currently have my 15% bond allocation split between Fidelity Total Bond index (my choosing) and Baird aggregate bond index (what's available in my 457b). I have read about CD ladders and didn't really understand why anyone would use them because of the limited liquidity and similar returns to HYSA.

     

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  • Zaphod
    replied
    I just buy the bond fund at this point, try to pick up some duration to get price convenxity, etc...on your side. You still much of the same benefits as individual bonds though they are turned over more and it isnt a stable group of holdings.

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  • jacoavlu
    replied
    Like I said with a CD you may lose liquidity. T bill can be sold easily as long as you don’t buy direct from treasury.

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  • triad
    replied







    how risky are CD’s?  They give more interest then individual t bills
    Click to expand…


    you have to calculate the equivalent yield as T bill interest is exempt from state tax, at least in most states I believe

    they would be extremely low risk, but the main downside is loss of liquidity
    Click to expand...


    so if you live in a tax free state like texas it would never make sense to buy an individual t-bill as long as the CD rate was higher (currently <2% vs 2.6%)

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  • jacoavlu
    replied




    how risky are CD’s?  They give more interest then individual t bills
    Click to expand...


    you have to calculate the equivalent yield as T bill interest is exempt from state tax, at least in most states I believe

    they would be extremely low risk, but the main downside is loss of liquidity

    Leave a comment:


  • triad
    replied
    how risky are CD's?  They give more interest then individual t bills

    Leave a comment:


  • Zaphod
    replied










    At what point in one’s investing career does someone utilize CDs and CD ladders. Would it be later and towards retirement? Or would one make a small percentage (3-5%) of their portfolio earlier in their career to lower overall risk?

    I doubt I’d use them currently, as HYSA more suits my current needs. I can’t find a decent answer on the internet (at least not one catered to higher earners).

    Thoughts?
    Click to expand…


    They’re basically a bond equivalent that doesn’t gain/lose principal with interest rate swings.
    Click to expand…


    So if one was projecting negative interest rates in the US, then it could be reasonable to have a CD ladder with the highest dollar amount in the longest term (5 years) at the current rates, with smaller sums that mature sooner to potentially utilize that capital elsewhere if the interest rates stay stable or increase. I’m not smart enough to make that prediction, yet.
    Click to expand...


    If you thought that, why wouldnt you buy bonds with a similar interest rate and also reap the gains in price? Although you have some interest rate risk you at least get your money back at whatever effective duration you've chosen.

    The bond market is currently calling for a number of rate cuts, which may or may not come to pass. We shall see, but there is some disagreement in bonds/equities right now. I have had a good portion of bonds myself, for a while now, but they are indeed rich.

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  • Brains428
    replied







    At what point in one’s investing career does someone utilize CDs and CD ladders. Would it be later and towards retirement? Or would one make a small percentage (3-5%) of their portfolio earlier in their career to lower overall risk?

    I doubt I’d use them currently, as HYSA more suits my current needs. I can’t find a decent answer on the internet (at least not one catered to higher earners).

    Thoughts?
    Click to expand…


    They’re basically a bond equivalent that doesn’t gain/lose principal with interest rate swings.
    Click to expand...


    So if one was projecting negative interest rates in the US, then it could be reasonable to have a CD ladder with the highest dollar amount in the longest term (5 years) at the current rates, with smaller sums that mature sooner to potentially utilize that capital elsewhere if the interest rates stay stable or increase. I'm not smart enough to make that prediction, yet.

    Leave a comment:


  • The White Coat Investor
    replied




    At what point in one’s investing career does someone utilize CDs and CD ladders. Would it be later and towards retirement? Or would one make a small percentage (3-5%) of their portfolio earlier in their career to lower overall risk?

    I doubt I’d use them currently, as HYSA more suits my current needs. I can’t find a decent answer on the internet (at least not one catered to higher earners).

    Thoughts?
    Click to expand...


    They're basically a bond equivalent that doesn't gain/lose principal with interest rate swings.

    Leave a comment:


  • Tim
    replied
    The yield curve greatly increases financial institutions appetite for funds. The spreads just aren’t there.
    Risk free return doesn’t offset now. It has, not today.
    How does 12% sound? Great if inflation stays at 2-3%.
    https://www.thebalance.com/can-cd-rates-go-back-to-historical-highs-and-lows-4179031

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  • bean1970
    replied
    I never had a CD until this year.  I had excess cash that wasn't FDIC insured so i put it in a CD locked at 2.75%.

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  • ajm184
    replied
    I would be reluctant to use an 'investment in CD's'.  The use case for a CD/CD ladder would be saving for a specific goal at a specific point in the future with decent though irregular CD purchases.  Between technology improvements and competition, use of CD/CD ladder is almost archaic unless you are making a side bet on rates falling faster than the bank anticipated when marketing the CD rate.  Most folks would be better off creating a ladder via treasury direct.

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  • Lordosis
    replied
    I think they are kid of worthless unless you keep around a lot of cash with specific needs in mind.

    I have a 5K CD at my primary back because if I keep a 20K minimum balance across all accounts I get the silly benefits that they offer.  Fee checks, no atm fees, better rates, invited to the picnic, etc.   And I do not want to keep all 20K in the checking account making .01% interest.

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  • Peds
    replied
    Personally never.
    Maybe if I absolutely had a known fixed cost <2-3 years away that was mission critical.

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  • danesgod
    replied
    With online savings accounts, I've looked and the answer seems to be never? Several online savings accounts have higher APRs than their own banks CDs. Maybe I'm looking in the wrong places, I'd be interested if anyone knows...

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