Here's a hypothetical situation for those who'd like to give their thoughts. With rates supposedly going up soon, I have a CD that will mature the end of the summer. Just trying to think ahead, what would you do?
Assume the following:
(a) already have money in both index funds and CDs
(b) for investing, only want index funds (no specific stocks, gold, oil, etc).
(c) for CDs, only want normal CDs (no brokered CDs, annuities, or other such products).
No one knows what the future will hold, but say everything is kind of as it is today (as far as rates and stock market levels) at the end of the summer, and you had these 3 choices then. Which would you do?
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(1) a 3%, 4-year CD special pops up -- but with a pretty harsh EWP (say, at least 2 years of interest)
(2) a 1.6% no Penalty CD (not a lot of risk, easy to get at, but not much more than some savings accounts)
(3) Putting money into a general Index fund (S&P, Vanguard Total Stock Market, etc)
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Would you put more money into your index fund? But the stock market is literally at an all-time high right now, with a lot of stuff way overvalued. Would you put it into a new 3%, 4-year CD with a harsh EWP? Not bad perhaps, but would it be worth it to wait and see if rates go up even more? What about a No-Penalty CD (say 1.6%) -- no risk, but very paltry returns. How long would you keep it parked there before pouncing on something else, or putting it elsewhere?
