My idea For Certificates of Deposit (CDs)

GetRichordietrying said: "I plan on setting up 12 cds with about 10k each. and the cds i want pay 4% for 4 months. My plan is to have one rolling over each month. And the money that rolls over i will keep it in the accounts and then i will take out the money when i retire.... Tell me what you guys think -Jack"

JAP said: "[quote=GetRichordietrying;633]I plan on setting up 12 cds with about 10k each. and the cds i want pay 4% for 4 months. My plan is to have one rolling over each month. And the money that rolls over i will keep it in the accounts and then i will take out the money when i retire.... Tell me what you guys think -Jack[/quote] Are you saying you have 120K in cash just sitting around? After you take out taxes and account for inflation... you [I]might[/I] break even."

newinvestor123 said: "That's a decent plan, but like JAP said, after taxes and inflation, breaking even is about all you could expect. I suggest diversifying a bit - Find some high yielding stocks with stable dividends and sign up for their DRIPs."

Aligator said: "Getrich, you do know that it pays 4% annually, right? Not 4% for 4 months. 'Course, if you found one that pays 4% in 4 months, that would be a good deal.:whacky043: I will say one thing about your plan - it'll work. When you retire you would have some money, and I'm not sure all the investors around here will be able to match you."

Airelon said: "Personally Jack, I think it's a great strategy, and one I'm all about. [i]Usually[/i]. Thing is, with Ben's latest move on the Interest rate cuts, the CD's will reset at a lower rate. So look for the highest rates you can possibly get for the CD's? But CD Ladders (The terminiology for doing this) provide better liquidity, and sometimes, even greater returns than just a normal CD. If this is something you decide you'd like to pursue? Look for Banks or Institutions that specialize in CD Ladders. There are a few out there. I think Citizens Republic bank (Maybe it's Lasalle) even has a calculator on their website that helps you compare the difference between CD Ladders, and just normal CD's. I also believe in taking a small percentage in the returns from CD Ladders ([I]which is guaranteed income, though smaller return[/I]) and feeding that to my long term investment portfolios."

LongArm said: "[QUOTE=GetRichordietrying;633]I plan on setting up 12 cds with about 10k each. and the cds i want pay 4% for 4 months. My plan is to have one rolling over each month. And the money that rolls over i will keep it in the accounts and then i will take out the money when i retire.... Tell me what you guys think[/QUOTE] Two things: 1) If you want to ladder CDs for the long-term, that's not a great way to do it, IMO. You should instead go with longer-term CDs, as those generally pay more interest than shorter-term CDs. Start out by splitting your money between a 1-yr, 2-yr, 3-yr, 4-yr and 5-yr CD. Then, a year from now when your 1-yr CD matures, buy another 5-yr CD with it. Two years from now when your 2-yr CD matures, buy another 5-yr CD. And so on. In a few years, all of your CDs will be 5-yr CDs (earning relatively higher interest rates) and you'll have one maturing each and every year (providing you with SOME liquidity and allowing you to "average out" the fluctuating interest rates). You'll make more money doing it this way. 2) Even if you ladder your CDs the way I suggest, this is a very conservative long-term strategy if that's ALL you're investing in. (If, on the other hand, CDs are just one part of your overall portfolio, which also include stocks in some form, then I see nothing wrong with it.) Like JAP and NewInvestor said, your REAL return after inflation and taxes will probably be only a little better than break-even. But if you're a very risk-averse person, it is better than sticking your money under a mattress. Oh, and Aligator's right about the 4% being an ANNUAL rate, not 4% per four months. Shoot, 16% per year for no-risk CDs? Why would anyone buy stocks? (Well, okay, I'd still buy 'em. :D)"

FirefighterB said: "[QUOTE=LongArm;63826]Oh, and Aligator's right about the 4% being an ANNUAL rate, not 4% per four months. Shoot, 16% per year for no-risk CDs? Why would anyone buy stocks?[/QUOTE] Now, I'm hungover and tired, so I'm thinking MY math and thinking could very likely be wrong but; isn't 4% every 4 months only going to net you a 12% return annually? Am I missing something?"

GetRichordietrying said: "yes what firefighter said its 4% for 4 months.. i have a lot of money saved. i had 60k for collage but never went.. and i saved the rest, i don,t need to go to collage i make $1400 a week after taxes."

LongArm said: "[QUOTE=FirefighterB;63845]Now, I'm hungover and tired, so I'm thinking MY math and thinking could very likely be wrong but; isn't 4% every 4 months only going to net you a 12% return annually? Am I missing something?[/QUOTE] Would you buy it if I said that's "compounded?" No? Ah well, it was worth a try. :laugh: No, of course you're right. Apparently [B]I[/B] was too tired to be posting last night."

LongArm said: "[QUOTE=GetRichordietrying;63850]yes what firefighter said its 4% for 4 months..[/QUOTE] I think you're missing the point. There are no CDs paying 12% per year (4% every 4 months). That 4% rate is an ANNUAL rate. When you see the banks advertise a 4-month CD at 4% APY, that means 4% per YEAR, or about 1.33% every 4 months (assuming I'm awake enough for my math to be right)."

FirefighterB said: "[QUOTE=LongArm;63851]Would you buy it if I said that's "compounded?" No? Ah well, it was worth a try. :laugh: No, of course you're right. Apparently [B]I[/B] was too tired to be posting last night.[/QUOTE] I'm pretty terrible at math and my brain is focused on trying to figure out why drinking that much last night sounded like a good idea, so I wasn't too sure mine was right."

Rbreb13 said: "[QUOTE=GetRichordietrying;63850]yes what firefighter said its 4% for 4 months.. i have a lot of money saved. i had 60k for collage but never went.. and i saved the rest, i don,t need to go to collage i make $1400 a week after taxes.[/QUOTE]You sure about that? It's spelled "college"."

GetRichordietrying said: "yes my bad college"

TampaTrader said: "That's hilarious. - Anyway, the 4% would have to be per year. no way CD's are yielding 12% a year."

Aligator said: "[QUOTE=GetRichordietrying;63858]yes my bad college[/QUOTE] KNow what? I even agree with you on that college thing, too. Not that it makes any difference what I think, but not everyone should go off to college. But do yourself a favor and continue your education on your own. Become one of the elite group who call themselves self educated - and learn to speak and write so that no one can challenge you."

Raharu Haruha said: "[QUOTE=Aligator;63862]KNow what? I even agree with you on that college thing, too. Not that it makes any difference what I think, but not everyone should go off to college. But do yourself a favor and continue your education on your own. Become one of the elite group who call themselves self educated - and learn to speak and write so that no one can challenge you.[/QUOTE] the truly elite learn how to never be challenged, and they achieve that by never being challenged by anyone. listening, team work and understanding > self proclaimed arrogance."