1. Saturday, June 16, 2012 - 6:09 PM
Pearl: Your response about Risk #1 confuses me. What do you consider as "low" rates? From what you posted if Ken's readers know how to avoid risk #1 why are they reading and posting here? Ken's main information is mostly about where to find and get CDs and even he acknowledges that the rates are extremely low. Yet he posts them for those of us who feel they are right for our needs. Does purchasing these CDs means we "don't" know how to avoid Risk #1? Our risk level doesn't just depend upon the rate of the CD interest. It depends a lot upon our age, how much we have saved, and what debts we may have or expect to use these funds for in the years we have left, imo. What we learn from books is taken from a certain quoto of savers. I am more concerned with what I need to survive with my family and any debts I may need the money for.
1,401 posts since
Aug 10, 2011
Rep Points: 6,135
2. Saturday, June 16, 2012 - 7:27 PM
If CDs are right for you, that's great. No one has said that purchasing CDs means that the individual doesn't know how to avoid the risk of low-interest accounts.
Ken does post frequently on CDs but he also discusses other types of deposit accounts such as savings accounts and reward checking accounts for those who might be interested in those opportunities. If those don't interest you or are not right for you given your age/amount saved/debts or expected use in the years remaining to you, that is perfectly fine.
1,474 posts since
Nov 2, 2010
Rep Points: 6,405
3. Saturday, June 16, 2012 - 10:26 PM
Every investment entails risk. Some investments are riskier than others. The key issue is "risk tolerance". Some folks are perfectly willing to accept a paltry 1.65% yield on a 4-year CD when they explore their alternatives in fixed income. Would you prefer a short-term investment grade bond fund yielding 1.65% or the aforementioned CD? To answer the question you must drill deeply into such arcane subjects as SEC yield, distribution yield, duration, credit risk, interest rate risk, and expense ratios. Once you do, in this rate environment, you will snag that CD. The NY Times article today on target-date funds was interesting. It amazes me how many otherwise-intelligent folks just plop their retirement funds into a vessel with a nice-sounding name (Fidelity Freedom 2010 comes to mind) and never bother to do much else. Of course, the flip side of the coin is a person who has his or her retirement funds solely in bunched short-term CDs that just continually roll-over.
137 posts since
Feb 14, 2011
Rep Points: 944