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:
http://www.bankrate.com/brm/rate/high_home.asp?web=brm&prodtype=high
A personal journal documenting the path from financial freedom to true wealth. This blog explores what to do AFTER making the first million.
About Me
- Rags 2 Riches
- I started this blog on May 1, 2006. My goal in this blog is to document my upcoming financial adventures, and brainstorm/discuss ideas for generating cash flow on low-risk investments. I also hope that others can enjoy the mistakes I will inevitably make, and I may also discuss mistakes I've made in the past. I think this blog would be of more interest for those thinking about taking "the next step". Despite a net worth of about $6.5 million dollars, I find it difficult to find high-yielding (> 5%), low risk investments in today's environment. So I'm starting to look beyond the bond/stock markets into businesses, franchises, and rental properties. Disclaimer: I am only a beginner when it comes to finances/investing/taxes. So please read this blog with a jaundiced eye, and make sure you do your own due diligence on financial matters. This blog is meant for interest only, please seek a professional for financial advice.
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3 comments:
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.
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.
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"
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