I am so nervous to invest in stocks and mutual funds and cds at 5.25 seem pretty decent investment since you cant lose the money. What do you think???
2006-12-11 00:50:33 · 10 answers · asked by David W 2 in Business & Finance ➔ Insurance
If you are afraid of investing in the market, where you can lose as well as gain, a 5.25% guaranteed return is not bad. Everyone's risk tolerance is different, that's why there are many ways of investing. If you are comfortable where you are, stay there.
2006-12-11 01:00:50 · answer #1 · answered by deep5223 4 · 0⤊ 0⤋
As you are "so nervous to invest in stocks and mutual funds", my advice to you is to stay the course as you seem to be quite happy and thus satisfied with the "5.25 seem pretty decent" returns on your "investment since you cant lose the money" unless you are able to withstand the ups and downs of investing in stocks and mutual funds with which you could make much more, but you could also suffer losses if you get it wrong!
2006-12-11 01:10:01 · answer #2 · answered by Alfretz T 3 · 0⤊ 0⤋
It depends on the purpose of the money. If you are using the CD as a buffer against emergencies arising that would cut into your income, then having a small CD is a good thing. If you are planning on using CD's to fund your retirement, then you have not a.) researched the long-term tax implications of this strategy b.) spoken with someone knowledgeable about investing and and/or putting tax-deferral to work for you.
First, lets talk taxation:
That 5.25% sounds like a pretty good number. Lets keep the math simple and assume that you have a the maximum FDIC Insured $100,000 in a CD. This year, you make $5,250 on your investment. Lets futher assume that you are in the 28% Federal income tax bracket. Your 5.25% gain is taxed as ordinary income, you pay $1470 to Uncle Sam. State tax, lets assume 8% and pay Sam Jr $420. Combined, you have paid $1890 in taxes for the year. Subtract $1890 from $5250 and you have a gain net of taxes of $3360 or 3.36% Now how does that investment look? It hardly keeps pace with historic inflation rates!
Now, lets talk tax-deferral, I'm sure you have heard of it!
The next time your CD matures, you take it out and put it into a tax-sheltered annuity. Keep in mind, the annuity is no longer insured by the FDIC, but by the financial strength of the insurance carrier you purchased it from. If you are terrified of market fluctuations, you can get 4% guaranteed in many annuities. The point is, the money grows, you pay no taxes until withdrawls. If you pay taxes on the withdrawls, aren't you paying anyways? Yes, but you have put compounding to work for you. The money you would have had to set aside to pay taxes each year for the CD can now earn its own interest in a tax-sheltered annuity!
To summarize: Retirement funding=tax-deferral
2006-12-12 10:25:38 · answer #3 · answered by some advice 1 · 1⤊ 0⤋
A CD paying 5.25% is a very good rate. But a money market mutual fund is good also if you go to the big fund managers like Vanguard you should do OK with very little risk but they are only paying about 5.10% so you are good with that CD the only problem with a CD is if you need the cash you will pay a penalty for early withdrawal, with a money market fund you get a check book with it and you can cash a check for $250 any time you need to free of charge.If int erst rates go up you are locked in to your rate with a CD but with the money market fund you get the higher rates as they go up.
2006-12-11 01:01:46 · answer #4 · answered by ? 6 · 0⤊ 0⤋
If you are diversified (multiple type of investmetns) a cd or annuity is ok... but 5.25% is low.
I do a lot of funds that get me 8-25% all the time.
But when I finally broke the $200k I diversifeid like crazy.
2006-12-12 09:39:31 · answer #5 · answered by pcreamer2000 5 · 0⤊ 0⤋
Any good portfolio is mixed, I have real estate holdings, stocks, mutual funds and just rolled over my CDs to Merrill Lynch they offered me 5.67% and since they own several banks they don't have a 100,000. max that others have. The reason most folks have CD's is because they are insured by the federal gov. FDIC up to 100k per person, some banks can be insured up to 10million per person.
2006-12-12 03:18:59 · answer #6 · answered by Anonymous · 0⤊ 0⤋
CDs are great, You don't have to worry about losing money and saving accounts' rates are lower than cd interest rates. The only downfall is that you will have your money tied up and you can't get it out until the cd is over.
2006-12-11 01:36:24 · answer #7 · answered by Courtney 2 · 0⤊ 0⤋
Bank of America has many types of accounts with different interest rates. Also, they do not publicize this, but they offer different rates and terms in different states, so you may get a better rate by opening an account at one of their branches in another state.
2016-05-23 04:56:22 · answer #8 · answered by Annette 4 · 0⤊ 0⤋
Well, if I can also get 5.25% I would stay put.
2006-12-11 02:32:28 · answer #9 · answered by floozy_niki 6 · 0⤊ 0⤋
You can do better in stocks if you do your research right. I'm doing it.
2006-12-11 00:54:05 · answer #10 · answered by ? 5 · 0⤊ 0⤋