CDs Remain Useful Despite Low Yields

i have learned through experience.as soon as i hear a retiree go stocks are like gambling i know they likely have taken the riskiest path they could in retirement without even knowing it .
 

They are useful from a stability standpoint. People who cannot sleep with a lot of volatility. And there are plenty in this boat. Is it useful to have everything in cd's? Probably not. But for those that want stability and that have 'won the game' so to speak, I see nothing wrong with cd's. It doesn't mean they are uneducated.
 
it means they are making a mental choice not a financial choice, just because they are making a choice that is the riskiest for losing value . rich or poor the effect will be the same so winning the game has nothing to do with it . even if i won the game i don't want to lose value ..

it is always the mental choices that have us not do the best things financially . so making a poor choice because mentally it lets you sleep at night does not mean it is the better choice and a choice that shouldn't be taken to task so others may rethink their plan with this new realization .. .
 

If ringing up the highest number possible is the best choice for you and you have the appetite for volatility, by all means go for it. But I'm not going to tell people they are uneducated and making a poor choice for wanting some stability.
 
wrong!
ringing up the highest numbers is not what it is about . in fact it is about basing things on the worst possible outcomes .

developing a safe ,secure ,consistent income that can stand up to a 4% inflation adjusted draw with the highest success rate we can get is what it is all about . anything less than a 4% draw capability ,whether you need it or not is inefficient use of your money .

you cannot do that with cd's or fixed income alone . no one is saying you put all your money in equities . but 40-60% has proven to offer the highest rate of success with the lowest risk . volatility and risk are not the same thing at all.

out of the 117 rolling 30 year periods we had so far , at a 4% inflation adjusted draw a 50/50 mix survived 96.50% of them without ever having to take a pay cut .

fixed income survived only 45% of those 117 time frames .

it is very very risky and almost a coin toss that using fixed income will have you having to take a pay cut . would you want a 25% pay cut while working ? the difference between 3 and 4% is a 25% pay cut .

i rather have a 96.50% success rate if i had to bet on my income than a 45% one .
 
keep in mind , if you retired in 1965/1966 , you retired in to the worst time frame ever to retire . it was worse than had you retired in 1929 .

it wasn't markets or rates that did retirees in . it was the 2.50% inflation they had doubling in 3 years and tripling in the years to come that got them . spending so much down up front had even the greatest bull market in history unable to save them . it is not returns when spending down that you have to worry about .

it is excessive spending when real returns were negative that did them in . the sequence of your returns ,rates and inflation coming in can make a 15 year difference in how long the money last between the best and worst outcomes ..,
 
Earlier you posted about increasing your portfolio this year by several hundred thousands. If that is not bragging about ringing up your numbers I don't know what is! This thread is about how CD's remain useful despite low yields. And my contention from a stability stand point that is correct. No where have I said put 100% in cd's. You can throw out all the statistics you want about how one AA is better than another, but no one size fits all. My parents were strictly cd investors as I'm sure many here. They survived nicely and amassed a nice size nest egg. Would I advocate their approach today? No.... but people can live nicely on different approaches.

I know you think you have all the answers but you don't.
 
they are just a holding place for money waiting to be spent or invested . so i can't say they are useful for anything but that .

if someone chooses to throw a big portion of savings in them , i have no issue with that . but i can certainly disagree that they are useful for much , especially as an investment for generating a long term income that is above a 2% draw or so . which is really inefficient use of the money , since 40% equities would allow 4% with almost no risk over the long term .

so i certainly gave my reasons why it is not a good idea whether anyone does it or not . . i don't have to agree with the premise and in fact i don't . cd's are a better place to store this short term money than a money market when rates are falling . but they would be the last place i would use when rates are rising .
 
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Plenty of losses at the NYC casino today.

Earlier today the DOW was down around 1,600 points... largest intra-day loss in history.

At the closing bell, the DOW was down 1,175 points.
 
a 10% drop so far but a spectacular 300 - 400% run up since 2008 . certainly well worth investing in . markets never grow to the sky .

it is likely just a bump in the road .

the markets have been sooooo non volatile for a year that the trading machines were leveraging higher and higher buying stock with borrowed money .

when volatility is low the firm can borrow and buy more on margin because the loss potential in dollars is low.

but when volatility picks up they have to unload and sell or risk margin calls and losses bigger than they want . so all these computerized programs move together and selling leads to more selling .

the economy world wide is growing , unemployment is low , rates are still historically low and we have 81% of companies earnings being beat . throw in the tax cuts and this will hopefully be a flash in the pan because nothing changed . i bought today .
 
mathjak107 said:
a 10% drop so far but a spectacular 300 - 400% run up since 2008 . certainly well worth investing in . markets never grow to the sky .
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Unless one is a new gambler who arrived at the casino late in the game.

CNBC today said there were lots of new investors who waded into the stock market beginning in January.

.
 
mathjak107 said:
when volatility is low the firm can borrow and buy more on margin because the loss potential in dollars is low.

but when volatility picks up they have to unload and sell or risk margin calls and losses bigger than they want . so all these computerized programs move together and selling leads to more selling .

the economy world wide is growing , unemployment is low , rates are still historically low and we have 81% of companies earnings being beat . throw in the tax cuts and this will hopefully be a flash in the pan because nothing changed . i bought today .
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Both CNBC and FOX Business news referred to investors who bought and lost on margin who now may have to pay the piper.

.
 
the issue wasn't so much the individual investors . it is the pro's who borrow to trade o margin . the market was so passive for more than a year . it had little volatility so they just allow more and more leverage . but once volatility picks up they need to sell and reduce . this to shall pass
 
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One thing that confused me... both CNBC and FOX Business news said the fear was inflation and the Fed raising interest rates.
Someone on CNBC said the Fed should cut back on raising interest rates this year. But the way I understand it, the reason the
Fed raises interest rates is to keep inflation from getting out of control. So if there is inflation... the Fed will raise rates.
 
there is no science to it . the last 40 years every time the fed raised interest rates more than 1% in the year , the bond markets like that because it reigns in inflation . bonds actually went up and did well every time but 1994 .

but without markets generating billions in profits for investors , spending falls off . i know until we bounce back we are not buying the co-op we were going to buy .

so without the markets doing well inflation is less of a threat .
 
mathjak107 said:
there is no science to it . the last 40 years every time the fed raised interest rates more than 1% in the year , the bond markets like that because it reigns in inflation . bonds actually went up and did well every time but 1994 .

but without markets generating billions in profits for investors , spending falls off . i know until we bounce back we are not buying the co-op we were going to buy .

so without the markets doing well inflation is less of a threat .
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Discussion on the business news channels say that inflation fear has spooked the stock market... inflation caused by a good economy, business growth, tight labor market and higher wages.

Yet at the same time, they do NOT want the Fed to continue to raise rates [raising rates is what the Fed does to fight inflation.]

That is what confuses me.
 
I think part of the volatility is due to the swearing in of the new Federal Reserve Chairman Jerome H. Powell and some of the comments made by Janet Yellen as she leaves her post.
 
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The stock market was way overpriced and has been for quite awhile. Even the experts have said it has long been due for a correction.

Gamblers also have winning streaks but winning doesn't last forever.
 
the bull was going on because so many were so pessimistic , but once the tax cuts were signed there was to much euphoria . i cut from 50 to 40% equities out of comfort . i now am starting to beef up the allocation again
 
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I prefer CDs... moving along slowly but surely like Aesop's tortoise.

My aim is NOT to get rich quickly... but to live comfortably.

I don't mind the stock market hares running fast ahead of me.

Sometimes I pass those same hares after they have fallen and hurt themselves.


The race is not always to the swift.

http://read.gov/aesop/025.html
 
never forget , all these falls are down to levels that are still way a head of where cd's would leave you , and are still capable of producing far more income even after the dip . most retirees without pensions are not wealthy enough not to have their money work for them .
 
I have CDs and would never put my savings in anything risky. The only change I have made is the term. A few years back I had no problem investing it in 5 or even 10 years but now because of my age I have shortened the term. I lose a bit more than having it in a longer term but I sleep at night.
 
Ruth n Jersey said:
I have CDs and would never put my savings in anything risky. The only change I have made is the term. A few years back I had no problem investing it in 5 or even 10 years but now because of my age I have shortened the term. I lose a bit more than having it in a longer term but I sleep at night.
Click to expand...


Currently, a lot of banks have good short term special CD rates... so shop around.

Same with US treasuries... the 30 year treasury rate is not much more than the 2, 5 and 10 year treasury rates.

When short term treasuries have a higher rate than long term, it's called an "Inverted Yield Curve" and might be a precursor to a recession.
 
after the drop today the stock markets could loose another 50% and still be a head of "investing in cd's from this bull market alone so it just is a silly comparison.
the guaranteed loss will be cd's from inflation and taxes on them.

cd's are not supposed to be instead of investing , they are used with investing although many who are gun shy do it . it may be fine for them but others who need larger draws would be taking the biggest risk in retirement there is which is trying to draw anywhere near 4% with just fixed income .

so nothing wrong with fixed income but you have to take a big cut in pay from what your assets could produce and to me drawing so much less is really not an efficient use of my money when with little long term risk a 40% equity position could grow so much more over time and allow me to enjoy more of what i worked for .
 

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