CD or Money Market

I'm looking at either a new issue CD(5.35%) or a Money Market(5.03%).

At this moment in time would you lock in the rate or stay liquid in the money market?

I like flexibility and liquidity. YMMV, depends on your risk tolerance and if you may need the money.

Lock in

I have noticed the better CD rates are getting shorter time period, like only 8 months.

Problem is you can't lock in very long at anything over 5%

Either one is a good just depends your and how long you want to tie up cash

The experts keep saying interest rates cuts are coming, but that still hasn't happened. Just a few months ago they were saying 3 interest rate cuts were coming in 2024, you see that hasn't happened yet.

Be very careful with CD's

I received an unsolicited post card from Edward Jones in the mail yesterday. Interest rate for 3-mo was 5.3, 6-mo 5.3 and 1-yr was 5.09. I was interested

Read the very tiny fine print. If Cds are sold prior to maturity, the investor can loose principal value and a bunch of other garbage. Yields quoted are net of all commissions.

Nope.

Living in good times right now when either choice looks good.
Others comments are right on and you likely know that.
Your possible need for the money is one factor and trying to anticipate rate changes is separate. No one knows but an informed “guess” should be better than a coin flip. I pay a guy to make those type decisions for me.

Money Market funds are probably investing in T-Bills. Cut them out of the picture. Treasury Direct's website takes some getting used to, but a 30-Day T-Bill is pretty liquid.

https://ycharts.com/indicators/1_month_treasury_rate

https://www.treasurydirect.gov/

It's horrible...I used it to buy some series I bonds and it almost not worth it. But I did eventually figure it out and it's been well worth the hassle.

Why not both...diversify?

That's Edward Jones for you. Go to an actual real bank and CD's are great. I just had one mature and got 18K for doing nothing.

This reminded me to renew mine. Think I’m going Texas Capital Bank, 5 percent.

All CDs fully mature in 12 months despite claiming its a 6 or 9 month CD.

Consider laddered CDs. Every 3 months open a new CD so they mature at different times giving you access

Incorrect

They have CD up to 5 years

Please explain. If I buy a 9 month at 5% CD, I get 5% for nine months and my money at the end of nine months......don't I?

Yep

Robinhood money market account at 5.25% for first 3 months, then it goes to 5%

The 5% in your example is the APY, which is annualized. So 9 months is 75% of a year. That means you would earn ~75% of the annualized 5% rate. Say you started with $10,000. At the end of 9 months, you'd get 9/12 * 5.0% * $10,000 = $375 in interest plus your initial deposit of $10,000.

Those same experts predicted a recession last year. Talking heads. I would listen to RedRanger before CNBC!!

CD for us these days. Keep a few Benjamins in a Money Market as well for easy access. 5.25% is easy money in my opinion if you have cash to sit on for a bit.

That is a great rate on the money market, but it can change very quickly.

I am recommending one year CD's for my clients, even though our 90 day CD's have a higher rate.

Happy to answer any questions anyone might have! I manage a branch of a Texas-based bank in Austin.

I’ve had good luck with T-Bills on the Treasury Direct site. Have some 4, 13, and 52 week issued. The 4 week I have them renew automatically, in case I’ll need it for some reason. Paying around 5.25% these days.

I will take 5% with no risk all day long. As others have said if you have other access to money then locking in a CD for a year or two is good stuff IMO.

For money you are willing to lock up for longer a multi year fixed annuity is paying in the 6% range and that rate is guaranteed either 3 or 5 years (your choice) and all of the earnings are tax deferred until you withdraw it. No fees other than a penalty if you withdraw more than 10% in a single year.

I have placed some of my long term money into several 5 year fixed annuities at 6%.

Is there a 10k limit on t bills. ?

There is no limit that I'm aware of. I've been buying some here and there for years. A few of them are auto-renewing every week.

I don't understand why anyone would mess with CDs or money market funds when these 30-Day T-Bills are getting about 5.5% with no time commitment beyond 30 days. I have a family member that had money market funds frozen during the 2008 financial chaos. They got their money, but they had to wait.

Here are some money market fun times:
https://www.gao.gov/products/gao-23-105535

There is in an I bond, but I’ve put more than that in a 13 week T-bill recently. Another plus is you don’t have to physically go to the bank and fill out a bunch of paper, like when I bought a couple CDs last year. It can be handled on the Treasury website.

you can do a CD online with a simple application - I bonds have a 10k limit - Tbills no limit

No CD online with Frost Bank.

No. That 5% rate is an APR rate. Meaning annual percentage rate. So you will get less than the 5% APR after 9 months. Read the fine print to confirm. Or ask the bank specifically what rate you will receive since you didnt have a full 12 month agreement. Also you need to be aware the agreement can be cancelled by the bank if the rate goes down during your contract. You have the option to lock in another rate if that should happen but the new lock in rate will be less than the 5% they advertised . Called Put Options

There is in an I bond, but I’ve put more than that in a 13 week T-bill recently. Another plus is you don’t have to physically go to the bank and fill out a bunch of paper, like when I bought a couple CDs last year. It can be handled on the Treasury website.[/quote]

you can do a CD online with a simple application - I bonds have a 10k limit - Tbills no limit[/quote]
No CD online with Frost Bank.[/quote]

I was referring to online banks - Capital One, Marcus, Fidelity etc. have good rates and very simple online application

Same difference, you can try to explain it all you want. It's still 5% per year, whether you go 1 month or 5 years.

Link please to this fixed annuity paying in the 6% range.

Of course the 5% is the annual rate.

Banks can't cancel a CD term if rates go down, where did you get that from.

You are paid the gauranteed percentage rate you sign up for.

https://www.annuity.org/annuities/rates/

I have an Atlantic Coast fixed annuity

Again the locked in rate that’s guaranteed is a lower rate. Not the advertised rate. They cancel CDs all the time if the rates go down.

5% is a good rate. However, none of it makes sense when the real rate of inflation is greater than 5%.

Good grief man, couldn't you find a weaker rated insurance company. You might as well have put your funds in Micky Mouse Life Insurance Company of Argentina.

Rating (Rating Category):
Affiliation Code:
B++ u (Good)
g (Group)
Outlook (or Implication): Negative
Action: Under Review
Effective Date: February 23, 2024
Initial Rating Date: June 30, 1976

Annuities have their place. However, I wouldn't put a dime in anything but the strongest like Northwestern Mutual, New York Life, etc.

[/quote]


Again the locked in rate that’s guaranteed is a lower rate. Not the advertised rate. They cancel CDs all the time if the rates go down.

[/quote]


Worked in banking for over 20 years, at every bank you've ever heard of and some you haven't... Never seen a bank cancel a CD when rates went down.

Between those two, obviously the CD.

I appreciate the input.

I had looked at a 2 year treasury and a 2 year JPM new issue, callable CD and the CD had a higher rate.

I was comparing those to the liquid money market which wasn't that far behind.

I don't need the money. My decision is do I lock in the rate as the fed keeps saying they are going to cut in the future or keep it liquid in case a better opportunity comes up. Ie - higher inflation drive up rates.

A more specific question, so good for you on that. The more general question brought in some good info for all, so that had value. Hopefully the experts can offer more than a flip of the coin answer. I can’t.
I’m always hedging my bet so I have some of both.

Sir I do not need you preaching to me and your smart [censored] remarks - I bought my annuity two years ago and AC was well rated. The very recent downgrade in their rating is news to me that just came out in the last two months - and by the way Texas has a guarantee fund for up to $250.000 to protect consumers. My post did not tell others to buy their annuities - I simply stated that I had one of their annuities - chill out

Wrong again

You must be looking at some oddball CD

Legit Banks like Capital One or Bank OZK don't have silly stuff like that, you can go read thier CD Disclousure.

Sir I do not need you preaching to me and your smart [censored] remarks - I bought my annuity two years ago and AC was well rated. The very recent downgrade in their rating is news to me that just came out in the last two months - and by the way Texas has a guarantee fund for up to $250.000 to protect consumers. My post did not tell others to buy their annuities - I simply stated that I had one of their annuities - chill out [/quote]

I'll just refer you to the Age vs. humor thread. I'm in my upper 60's and I guess humor is one of the perks of age. You ended that post with chill out. Hmmm.........

I think annuities are great for several reasons, the best being liability protection. If TX law hasn't changed in recent years an annuity is shielded from litigation.

Like Red Ranger has pointed out, you are wrong. Fixed-rate CDs have rates that remain unchanged until maturity.

Read. As i have been saying the higher CD rates can be terminated. Callable CDs pay more than fix rate which i have been calling locked in rates


Callable CDs work similarly although there’s one key difference: they carry a call feature. This means that banks can terminate the CD before it matures. Banks usually have to wait a defined period of time before they’re able to call a CD.

If a bank does call your CD, you get to keep the principal (or the amount you initially invested) and the interest payments you’ve accrued up until the date it was called. You won’t get the remainder of interest you would have earned had the CD reached maturity.

That makes me wonder if it happens with any frequency.

I have a question for the experts. We have an extra business account with Bank of palestine (America) We opened it as a secondary account to our normal Chase business account ( these 2 locations are across the street from another on Town East Bld in mesquite, where we use to live) So we NEVER use that account...it has close to 10k just sitting there, not growing, not going down, I wonder if they think were dead lol, its been 10 years at least when we opened it, threw a little money in it as a backup account.

What would the experts do with it? We don't need it .....yet

I need to Check into this more. But in my Fidelity 401k I went very conservative.

Does Fidelity offer CD type interest of something similar to 5 percent?

Not an expert but stayed in a holiday inn once.

When you say don’t need it, this year? The next 5 years? 10+ years?

The answer could be Money Market at Vanguard or other brokerage making 5.3% totally liquid but will change as federal rates change. 1-3 years, a CD is attractive if you can lock in guaranteed over 5.

If you have 5-10 years you need to be in a total market stock fund.

People are real excited about 5% guaranteed, however the whole market is up 30% the past year. If you can accept the risk you can expect 7-10% returns annually if you don’t sell when it has a down turn.

I think at Fidelity there are some rules regarding qualified funds (IRAs) vs. regular investment account cash. The symbol SPAXX is an IRA money market that is 4.95 today, but was about 5% not long ago. The regular account cash symbol is FZFXX, which is a money market at 4.94 today, and about 5% not long ago.

I’m not sure some more time spent on the phone with them might fish around and get about a tenth or so better. I briefly had one of these accounts in T-Bills, but it wasn’t as easy to keep up with as Treasury Direct. That says a lot, considering how tricky Treasury Direct’s website is.

If any of you try Treasury Direct put a sign on your computer that says DO NOT HIT THE BACK BUTTON. If you do you get to log back in and start over. Logging in is a process, which is OK with me now for it’s triple jeopardy security. If anybody ever gets your funds out of that place they are good hackers.

Put it in a S&P 500 tracking ETF like SPY or mutual fund if you dont need it for 5 or more years. Also what scot said a total market fund like VTI or VTSAX
CDs in 401ks are designed for active retirees or within a few years of retiring

^^^^ I like this post.

If I didn't need it for 5 years or more, the least I would do would be an index fund. S&P has averaged 7.7% over the last 60 years.

NVIDIA stock up 116 bucks a share since last Friday

Fidelity has a specific department called Brokerage Link. In brokerage link you will have access to everything not just fidelity stuff. Its self directed but they can help you purchase what you are looking for