Tuesday, May 02, 2006

CD Yields are going up

I buy 6-month CDs at E-Trade Bank. These 6-month CDs are currently yielding 5.04% with APY of 5.17%. Not bad compared to what they've been yielding for the past few years.

I follow a laddering strategy for CDs similar to what you would do for muni bonds. I spread out my CD purchases by purchasing $50,000 worth of CDs every month for the past 5 months. I will then have a maturing CD every month from now on that I can roll over into some other investment in a rising interest rate environment. Most likely I will continue rolling my CD money over to other CDs, since I have enough cash on hand for other investments.

The downside of CDs is having to pay federal and state income taxes on the interest. So for the highest income bracket, 35% goes to federal, and 10% goes to California state. You lose almost half the yield to taxes.

Here's a link to figure out the best current CD rates:



Anonymous said...

I had searched and found the same CD with E-trade 4 months back; haven't found anything better since.

Having the same goal as you do; this has become like a part-time job looking for high yield with annuity-like features. With kids, and a demanding mgmt job - late night is reserved for research.

Rags 2 Riches said...

Any luck with your high yield search?

I am finding that there is no magical elixir. Higher yields generally come with higher risks. And as ridiculous as real estate has been the past few years, it still looks like the investment area of choice for high net worth individuals.

Anonymous said...

No luck so far -

without some catch,etc "10% yield up to $1,000 w/ direct deposit account setup"

Important thing is I'm asking around and talking with potential people that may have ideas of better yield... However I'm also asking for other poential investment instruments - this has become more interesting.

-signed anonymous- same guy with the bay area condo invesment comment.
I should get a name, maybe I'll call myself "cheap charley"