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6 Smart Moves To Buy CDs With Interest Rates At Record Lows

Monday, May 6, 2013 - 12:02 PM
There’s bad and then there’s historic, all-time bad. Unfortunately, that’s where CD rates are right now. Nor is there any relief in sight after the Federal Reserve said it plans to hold interest rates down until the unemployment rate falls to 6.5%.  Yet the need for the kind of safe, relatively simple savings option that certificates of deposit have represented for many of us seeking financial security is as strong as ever.

How to buy CDs when interest rates are at record lows |
ShorebreakShorebreak2,700 posts since
Apr 6, 2010
Rep Points: 14,636
1. Monday, May 6, 2013 - 2:11 PM
Tip 3 - Avoid long-term CDs until rates improve and Tip 4 - Consider blue-chip, dividend-paying stocks as an alternative especially with their caveat Blue-chip stocks also need to be viewed as a long-term investment seems to be in contradiction. 

First, I don't believe you should ever make an investment that is outside your comfort zone just to chase yield.  With safe investment rate options so low that is infact what many are doing, and many will end up being sorry.

Second, if they are saying to avoid long-term CDS because you don't know when rate will go up, why would you make a long-term play with a stock?

I do agree that unless you have a large amount to invest, rate chaseing is probably a losing game because of the time involved to do so.

I wouldn't necessarily avoid long-term CDs though.  Look for ones that have a reasonable penalty.  Two and Three years go this is a strategy we helped our clients with and most of them are earning above 2.00% at this point.  If rates go up, they still have an out.

cd :O)
ChrisCDChrisCD70 posts since
Nov 18, 2010
Rep Points: 457
2. Monday, May 6, 2013 - 3:13 PM
Re: ChrisCD @ 1. Monday, May 6, 2013 - 2:11 PM

In reference to blue-chip, dividend-paying stocks, the author of the article was pretty clear:

"This is not the place to put your emergency fund, or any other cash reserve that you need to be sure is safe. No matter how “blue chip” a stock might be, it comes with risk."

Regarding deposit account products he states at the beginning, "It’s always wise to have part of your savings in an investment where your principal isn’t at risk." Besides, long-term generally implies five years or longer and "The difference between many 1- and 5-year CDs is currently less than 0.75%.  It makes no sense to tie up your savings for years for such a small gain."
ShorebreakShorebreak2,700 posts since
Apr 6, 2010
Rep Points: 14,636
3. Monday, May 6, 2013 - 8:08 PM
The optimal strategy is to purchase five-year CDs, one a year for five years, from intermediate-term bond funds. Keep enough in the bond fund for re-balancing. It's really quite simple.


Hard to stretch the concept into 300 - 500 words, though. Popular financial writers always make the process sound much more complicated than it is.
BozoBozo137 posts since
Feb 14, 2011
Rep Points: 944