Today’s Hot Investment: Cash
Certificates of deposit and money market mutual funds were once among the dowdiest of all investments. In fact, most financial professionals wouldn’t even consider them investments. Today, if not king, cash is at least getting some respect.
The personal finance pages of numerous publications are touting the fact that rates for many CDs and money market mutual funds are now topping 5% and may head higher. With the stock market offering a particularly bumpy ride of late, a 5% return with no or little risk has some appeal. As Jean Chatzky wrote on the MSNBC web site recently, “If you have $50,000 earning bupkis in checking and you move it into a money market account yielding 4.5% annually, you'll have $52,250 a year from now. That $2,250 could pay off a credit card, make an IRA deposit or take you on vacation. In other words: It's real money.”
Matt’s View
“Bupkis,” for those not up on their Yiddish, means “beans.” More to the point, no one is suggesting building a retirement account with just CDs and money market mutual funds. However, if you have money in a low-interest bank savings account or too much money parked in a checking account (more than enough for monthly bill paying), you’ll likely do better with your bank’s money market account and even better with a money market mutual fund. As for CD’s, one Chicago-area bank recently offered a 9-month CD at 5.75% APY. If you’re tempted by a CD offered at a bank other than the one where you do business but don’t want to spread your accounts around, a number of banks are matching competitors’ rates. See if yours will do so by bringing in an ad showing the other bank’s offer.
This article filed in: Retirement , Saving
Managing Money by The Book
- "To keep me from becoming conceited because of these surpassingly great revelations, there was given me a thorn in my flesh, a messenger of Satan, to torment me. Three times I pleaded with the Lord to take it away from me. But he said to me, 'My grace is sufficient for you, for my power is made perfect in weakness.'" - 2 Corinthians 12:7-9
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