I think they are guaranteed against inflation. Your interest rate will flucate as the inflation rates do. So it does sound good up front, but what is your net gain at the end of that journey?
Can you make more in interest from a long term CD?
Well, if the rate of inflation is more than 2% (the avg long term CD), then I inclined to say yes, but you make me question my logic.
Repo-ed - Sorry!
If you are buying treasury bonds, you have to hold on to them long term to get the financial benefits. And you have to make sure that you, and your estate, know that they exist, the bond number, and the issuing value. Since the gov't now only does them online and does not issue a paper certificate anymore, it's harder to remember it's out there. And believe me, the gov't is not going to go looking for someone to redeem the bonds!
If you buying into bond funds, the market value changes daily. You can loose your principle buy in depending on when you cash out. It usually costs several thousands to buy into a fund. (3-100k). The value is really based on a supply and demand. And since you have middle men buying and selling the bond shares, you are paying them too. So how do you come out ahead? Buy at the beginning, from the original bond offerer (usually cities and counties), large investment, and sit on it until the bond matures some 10-25 yrs down the road. Oh, and don't loose the information either. No one comes looking to pay out on a bond.
CD's now - well the banks are real friendly in sending you paper mail saying "Congratulations - you own..." and they send nice reminders too, saying, "Hey, your CD is about to mature, what do you want to do?" And if they don't hear from you, or your estate, they either send you a check or put it in your bank account. And if you purchase a long term CD and need emergency funds - you can cash it out. Ask real nice, and they often waive the penalties/fees.
Since you can do short term or long term CD's, it's a win-win.
Agreed. I do love my ally cd accounts adding up!
Repo-ed - Sent them an email asking how to avoid receiving all that paperwork each time I open a CD.
lol, good call!
Repo-ed - Ally responded with - they were required by Federal Law to **mail** (no electronic notification) for each and every account, to include CD's. So no getting around that.
The other thing I learned - anytime in the first 10 days that a CD is open, you can add funds to the CD.
This thread has really opened my eyes to saving money. Thanks!
I do agree it is a lot of maintenance. I've tried to ladder last year and just gave up because I thought the rewards wasn't worth the upkeep.
ihatemyscore - that's great! Keep reading, ask questions, and share what you think with us.
treezie - were you buying one CD a year? I'd be happy to help you with organizing or tracking the CD's if you want. I use an excel spreadsheet and track the CD, the amount, and the date it matures. Just send me a private message.