Just bought a CD

[disneysteve]

I just bought a 1-year CD with an APY of 2.05% from OneWest bank. I put in $6,000 that had been in a money market account that I recently discovered was paying a whopping 0.1% interest so I will increase my earnings more than 20-fold.

Julie, thanks for the info for the bank in Georgia but their website didn't have any link to buy a CD online so that offer might only be for local residents.

[simpletron]

to open a new account at the bank of georgia, you must do it in person. but you don't have to live in the state or anywhere particular, so it isn't exactly a local thing... just not worth the travel for it.

[KTP]

I was going to do the CD thing with my EF but ended up putting it into 6 large caps paying 4.5% dividend or more. Probably crazy but...

[disneysteve]

I was going to do the CD thing with my EF but ended up putting it into 6 large caps paying 4.5% dividend or more. Probably crazy but...

Not really crazy but certainly more risky. The share price could fall. The company could reduce the dividend. Or you could luck out and the price could rise. There is also an investment cost to buy and sell the shares. Not saying it is right or wrong. All depends on your situation. Most would say that funds you may need in the short term should be somewhere safer than the stock market.

[wincrasher]

You should never mix these three types up:

Savings
Investing
Trading

Savings is your EF and for short term goals - this should be invested very conservatively. Like CDs, money market, passbook, etc.

Investing is longer term - this could be stocks, annuities, real estate, etc that you want to hold. Risk can vary depending on your time horizon.

Trading is pure speculation. Stocks, short term. Fairly high risk and should only be used with money you can afford to lose.

I see people on the forum constantly mixing their money up. Think of it as buckets to fill - first fill your savings bucket. Then spill over into your investing bucket. Then, when both of these are filled, you can put some in your trading bucket.

Investing and trading are alot of work - that's why the yields can be higher than savings. But the risk is much greater.

Just like we want to avoid debt, we also need to manage risk.

[Ima saver]

Steve, I don't know what their cd's are paying. I have 2 checking accounts there and that is where I keep my cash for building spec houses. These checking accounts are paying 2% with a minimum of $1000. I have one account for business, one for personal bills and one for savings. (I meant to say 3 checking accounts there) I need to keep lots of cash liquid in case we find a good deal on a lot for sale.

[KTP]

Here are a few things that pushed me toward dividends of huge stable companies vs a 2% CD:

4.5% >> 2%

35% tax >> 15% tax

Hmmm, maybe I not so crazy after all

[disneysteve]

35% tax >> 15% tax

Keep in mind that the 15% capital gains rate only applies for investments held for more than 1 year. If you have to tap this money for an emergency prior to that, it will be taxed as ordinary income.

[KTP]

I was refering to the 15% rate on dividends that is good no matter what your tax bracket until dec 2010 (unless they extend it). The CD is going to be taxed at whatever your income bracket is.

[disneysteve]

I was refering to the 15% rate on dividends that is good no matter what your tax bracket until dec 2010 (unless they extend it). The CD is going to be taxed at whatever your income bracket is.

Sorry. Didn't know about that one. I thought it was only 15% if held for a year or more.

[kv968]

Sorry. Didn't know about that one. I thought it was only 15% if held for a year or more.

You do have to hold the stock for at least 60 days within a 121-day period that starts 60 before the ex-date to get the qualified dividend tax. If you're in the 15% tax bracket or lower you don't pay any tax on the qualified dividend. Of course this is all most likely going to end next year when that act expires. But until then...

[disneysteve]

there are one year annuity is yielding 3% with some companies.

Ok. I'm curious. What exactly is a one year annuity? That site gives zero information about the product unless you enter all of your personal data which I'm certainly not about to do.

What are the terms and conditions of a one year annuity? What are the fees, costs, commissions, etc.? To me, a one year investment with a 3% yield means if I put in $10,000, at the end of the 12-month period, I should have a minimum of $10,300 (probably a bit more due to compounding) and be able to withdraw the full amount without penalty at that point. I'm guessing that this is not how the annuity works so please fill us in on the details.

[mom-from-missouri]

Would you all recommend putting small amounts of money into CD's short term for a non-for-profit? Our 4H club is looking at what to do with around $800. We will be needing it for a project next July, and one of the kids suggested CD's for 6 or 9 months. We did check the bank here, and CD will earn a little more than a savings account with interest ,which is .5% at the moment.

What would you recommend?

[disneysteve]

Would you all recommend putting small amounts of money into CD's short term for a non-for-profit? Our 4H club is looking at what to do with around $800. We will be needing it for a project next July, and one of the kids suggested CD's for 6 or 9 months. We did check the bank here, and CD will earn a little more than a savings account with interest ,which is .5% at the moment.

What would you recommend?

With that small of an investment, you are talking about a difference of about $1.00/month in interest. You can get a 6-month CD at 1.99%. In 6 months, it will be worth $808. At 0.5%, the account would be worth $802, so a $6 difference. Certainly not a big deal, though every little bit helps.