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Hold Off On CDs Purchases For Now

rhinefire

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With the strong rumors of rate hikes we can already see financial institutions baiting people to buy products now as they try to get your money at lower rates than may be coming down the road. While it is impossible to know what is coming don't fall for the bait right now. If you have to put some in then go the laddering route putting a little in to one year CDs in steps. Look for internet banks like Ally to lead the way in raising the rate. To see who is offering what go to www.depositaccounts.com but again don't jump in with everything until we hear what the fed is doing.
 
It should be noted that when the Fed raises rates, it will do so by increasing both the interest paid on excess reserves and discount rate, by say 25 basis points each. Doing so push the band at which the fed funds futures market operates, while increasing the effective rate. What will be interesting to observe is the spread between the fed funds target rate and the effective fed funds rate after the first increase. Not all depository institutions are paid interest on excess reserves.
 
With the strong rumors of rate hikes we can already see financial institutions baiting people to buy products now as they try to get your money at lower rates than may be coming down the road. While it is impossible to know what is coming don't fall for the bait right now. If you have to put some in then go the laddering route putting a little in to one year CDs in steps. Look for internet banks like Ally to lead the way in raising the rate. To see who is offering what go to www.depositaccounts.com but again don't jump in with everything until we hear what the fed is doing.

I see no reason to invest in the CD markets anyway.
even if the fed does raise the rate the interest earned will still be garbage.

most CD are paying 1-2% if you are lucky.

it isn't worth putting your money into them.
there are better investments out there that earn more back.

a low risk mutual fund will earn you more back in a year than a CD.
 
I see no reason to invest in the CD markets anyway.
even if the fed does raise the rate the interest earned will still be garbage.

most CD are paying 1-2% if you are lucky.

it isn't worth putting your money into them.
there are better investments out there that earn more back.

a low risk mutual fund will earn you more back in a year than a CD.

Low risk mutual funds lose money like all other investments related to stocks, bonds, etc. CDs and savings accounts have a place in all portfolios unless you believe nothing can ever go wrong. "Risk" tolerance is the bottom line. I no longer need to invest in anything related to even the smallest risk as my money is enough to live on comfortably until my death. The younger one is the more risk you should be willing to take rebalancing your positions annually if needed. My single point in the OP is for those looking at CDs to buy now, not to those wanting to maximize their investments returns.
 
Low risk mutual funds lose money like all other investments related to stocks, bonds, etc. CDs and savings accounts have a place in all portfolios unless you believe nothing can ever go wrong. "Risk" tolerance is the bottom line. I no longer need to invest in anything related to even the smallest risk as my money is enough to live on comfortably until my death. The younger one is the more risk you should be willing to take rebalancing your positions annually if needed. My single point in the OP is for those looking at CDs to buy now, not to those wanting to maximize their investments returns.

Banks will make more money off of CD's after the first 25 or 50 basis point rate hike.
 
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