Low risk investments like CDs

Roosh

Cardinal
I don't like investing money, because it adds to my daily stress level, so if I have any cash lying around, it's sitting in a savings account. I was looking at CDs and noticed they pay about 1.7% for a one-year term, which is more than the 0.4-0.5% a savings account gets. I like that it's FDIC insured.

Is there any kind of "strategy" with CDs? It seems simple enough. And if I want to increase the risk, would money market mutual funds be the next step? Based on where the market is going, I'm sure we're due for a correction soon, and I don't want to have to worry about that or timing the market. I'm looking for a low-risk set-it-and-forget-it-strategy.
 

Alpha_Romeo

Kingfisher
The risk of CDs is loss of value of the initial investment due to inflation. Of course, you will get the initial balance back, plus interest upon maturity. But you may find that you are able to purchase less. Interest rates are artificially surpressed, so CDs are a losing proposition. They are only useful for parking money for short periods of time, not as a long-term investment.

S&P index tracking fund with low expense ratio would be a better “set it and forget it” type of investment (there are probably others). Only invest the amount that you can afford to lose.
 

Australia Sucks

Kingfisher
Roosh it just seems bizzare to me that anybody with your level of business savvy would take the easy option of investing in cash long-term when its been proven to be a losing investment over the long run. I know you are aware of how the fiat system works and how cash loses value over time when taking into account income taxes and inflation. Are you so rich that you don't need to worry about your capital losing value?

I do understand your point of avoiding stress but there are so many low maintenance things you could invest in (albeit with some risk of course) which would only be marginally stressful. For a man who preaches self improvement and taking the hard (but rewarding) road for most endeavors in life why are you taking the easy way out in this case?

Especially given how important financial freedom is to happiness and health.

There are robo advisers if you wish and its easy enough to build a a diversified set and forget type portfolio of well diversified assets that will give you a positive return in most years.


Or something like the Harry Browne permanent portfolio strategy does take a little bit of work every year for rebalancing, tax reporting, etc. But basically it will give you a long term rate of return much higher than cash with smooth returns and minimal volatility. Even during the 2008 financial crises following this strategy you would have had a maximum drawdown of less than 15% (and fully recovered the losses in less than 18 months).

https://finpage.blog/2019/01/05/harry-brownes-permanent-portfolio-2018-update/

http://www.lazyportfolioetf.com/allocation/harry-browne-permanent/

Described in the above two links is the original strategy which is 25% gold ETF, 25% U.S. stock market ETF, 25% short-term bonds (or cash or short term treasuries depending on the version that the investor implements) and 25% long-term bonds.

If you would to get more sophisticated but keeping the same underlying principal intact you can diversify your money more instead of being in just 4 buckets you could have a lot more buckets by adding various precious metals and commodities ETFs, REIT ETF, peer to peer lending, international and emerging market share ETFs, etc. But you do not necessarily need to all that. The original strategy is simple and works well enough.

There are even ready to go managed funds which implement the strategy for you albeit with higher costs/fees.
 

Road_Less_Taken

Woodpecker
I am assuming you have a decent amount for saving. I get about .6-7% more than cash (so around 2.4%) for a pretty easy set up. Pretty much zero risk.. But you need $100K minimum. You can PM me about it if you want.
 

Thomas Jackson

Woodpecker
Look into a CD ladder.

Also something like a Vanguard money market account pays well above .4% (1.6% or so). I would suggest index funds though. You dont have to worry about these on on a daily basic.
 

Alpone

Woodpecker
Money market accounts are great and very safe. You may also want to look at buying some long running, conservative mutual funds from Vanguard. They're broadly diversified, handle recessions well, and some spin off dividends which you can eventually live off of (if you have a big balance). Wellesley and Wellington are the two most well known funds. These are often the bedrock investments doctors, lawyers and other upper middle class people use to counter-balance riskier investments in individual stocks. When the market declines (and it will), just keep throwing money into them. You'll be buying shares at a discount. Eventually things will bounce back and your returns on your recession-era shares will be substantial.

https://investor.vanguard.com/mutual-funds/profile/VWELX

https://investor.vanguard.com/mutual-funds/profile/VWINX
 

kel

Pelican
qwertyuiop said:
o&g stocks pay 5%+ dividends and are fairly stable. I don't know why anyone would buy cds if they are smart.

O & G = oil and gas? Got any particular recommendations, something I wouldn't think of myself like ExxonMobile?

I'm looking into water stocks, as well. After years of making money on tech stocks - given that I know tech and many of them seemed like they just couldn't lose during this period of mania - I want to move more into investments in real commodities or companies that handle real commodities.

Also medical technology and services which I think will explode as the boomers continue to age and spend all their money and all the nations money trying to cheat death a little longer.

These are all big fields though, though to get a good sense of what's what.
 

Hypno

Crow
CDs and bonds are fine, but real inflation is greater than the interest they pay so you are very slowly going backwards. If you have a short term horizon, for example you need the cash in 10 months for a downpayment or something, yeah bonds and CDs are good. But really what you are doing is like the man in Matthew 25:18 who buried his mater's gold.

(The way bonds and CDs work is there is usually a fixed interest rate. In normal times, the interest rate is a little better for a longer commitment. But that also increases your time horizon over which you will be exposed to changes in interet rates. This confuses people at first because the interest rate is fixed. That is true. But look at it this way. Say the rate for 1 year is 1.7%, and 2.2% for 5 years. You opt for the 5 years. But after 2 years, perhaps inflation increases and prices are going up. CDs are now paying 5% for 1 year and 7% for 5 years. You still get the benefit of your bargain - 2.2% - but its not the good deal you thought it was when you invested. This is interest rate risk. As someone above mentioned, you can ladder your CDs. This means instead of putting your money all in one term or date, you put some at 6 months, some at 1 year, some at 2 years, some at 5 years, etc.)

If you want to have money for retirement, you should be in the market so you get a rate of return that excess inflation. Dollar cost average your way in to spread out your price risk. Stocks are expensive but that doesn't mean they won't go higher. The Harry Browne permanent portfolio or broad based mutual funds are good strategies for the long term, although its extremely conservative - rule of thumb is 100 minus your age. So if you are 40, then your portfolio should be 60% equity and 40% bonds; harrys' is half cash or gold, a quarter short term bonds, and a quarter equities.. Vanguard had funds with extremely low fees.

Note that the S&P 500 index is the 500 largest U.S. companies by market capitalizatioin, rather an an equal amount of all 500, so its dominated by the Facebook, Apple, Google, and other large tech stocks. https://www.schwab.com/resource-center/insights/content/7-alternatives-to-cap-weighted-funds It has only indirect international exposure. Look for equal weighted mutual funds. Larger indicies, like the Russel 3000 or Vanguard Total Stock index, are better, because the dominance of the large stocks is less.
 

NoMoreTO

Ostrich
I don't have much knowledge about CDOs so will leave that to others.

I understand the desire to be free from constantly thinking about your investments. It can take up more mental energy than it's worth considering it might be a modest amount of money you are just looking to detach from and keep in safe place.

I'd recommend Silver. It's a proper store of value, you can buy 10oz bars or 1oz coins, and when you own the physical, it has lots of potential upside. Silver is also exchangeable outside of the monetary system, which someday could be an important thing. Silver works when the lights go out, silver works when the fed goes digital and we go to a cashless society.
 

EndlessGravity

Kingfisher
CD's. What a joke. Give your money to the banks so they can throw it high risk investments while the rate you get won't even keep up with inflation.

Hard goods all way. Have enough cash on hand for SHTF. We're at like defcon-4 for it now.

This thread didn't age well, from my perspective. With the Fed now bailing out money markets and everyone else, I'm glad we've always held cash and hard assets.
 

SlickyBoy

Ostrich
For the minimal rate of return these days, you're better off with a regular bank account. That and whatever you do with your funds, ensure they are liquid - you don't need to run into hassles trying to get them out if hyperinflation hits and panic ensues. The added penalty of CDs for early withdrawal makes them that much less appealing in that scenario.
 

NoMoreTO

Ostrich
I thought again about the CD as an investment. The interest isn't worth the loss of liquidity in case you need the money. Unless the plan is to lock the money away from yourself.
 

redbeard

Hummingbird
Moderator
I like what WallStreetPlayboys has to say about cash (in Investing Priorities). tl;dr, save up $10k cash and then put everything else into investments. $10k is plenty to cover your butt in case of emergency.

I also lament the fact that interest rates on savings accounts have almost disappeared. However, there's not much I can do about it. So I put my little emergency fund away, invest the rest, and call it a day. No worth stressing about the what...$100?...you would've made in a year off interest being 1% higher.
 

Sitting Bull

Sparrow
So this is now a christian forum yet everybody still engages in usury ? Interesting.

See the detailed economic and theological analysis by Anthony Santelli Ph. D. in the Culture Wars issue of July/August 2013.
To summarize it very briefly, usury is an act of war cf. Deuteronomy 23:19-20. Christians are allowed to practice it defensively if economic war is waged on them ; if they practice it at the legal rate, they are simply getting back the money that's been stolen from them by usury.

It would be better to not practice usury at all, sure, but one must realize in a world of state-sponsored usury, any group who abstains from usury in any way will get totally destitute in a short time. They might just as well leave society and go live a lonely, rough life on a desert island.

Poverty is an evangelical counsel, not a commandment. Transforming a counsel into a commandment has usually created long-lived economic utopias but short-lived sects.
 

redbeard

Hummingbird
Moderator
See the detailed economic and theological analysis by Anthony Santelli Ph. D. in the Culture Wars issue of July/August 2013.
To summarize it very briefly, usury is an act of war cf. Deuteronomy 23:19-20. Christians are allowed to practice it defensively if economic war is waged on them ; if they practice it at the legal rate, they are simply getting back the money that's been stolen from them by usury.

It would be better to not practice usury at all, sure, but one must realize in a world of state-sponsored usury, any group who abstains from usury in any way will get totally destitute in a short time. They might just as well leave society and go live a lonely, rough life on a desert island.

Poverty is an evangelical counsel, not a commandment. Transforming a counsel into a commandment has usually created long-lived economic utopias but short-lived sects.
Do you have a link to this article? Or is it only in the magazine.
 
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