[CoachKandSportsguy]

Originally Posted by toeser

"CDs which should never be purchased"

I disagree. It depends upon one's circumstances. Even with inflation, we have all the money we will ever need provided we just don't lose it. So, a few years ago when CD rates were much higher, I laddered out CD's for several years for 15-20% of my total portfolio just to have some money I didn't have to think about or worry about. The yields I booked were pretty much in line with A-AAA bonds, so why not?

because most times, they are repackaged treasury bonds, in which the bank gets a cut, so you can do better with treasuries for the same time period. but if the CDs at that time had higher rates than similar risked debt, great, but I doubt that differential existed over a long period of time. There are always brokers taking a commission in many different ways. ie, zero commission means that you don't see a commission on your brokerage statement, but you might just get ****ty executions, and the broker takes his/her cut in price, which you would never see unless you compare all the time and sales at bid and ask prices. . . sometimes fidelity will execute in house if they deem it more profitable for them, in stead of in the market. I saw that today, I sold my options at the ask per fidelity execution, but that was not the ask in the market at the time. kind of the same as super market club price savings, where the savings is against a marked up price.

So good for you if you found a favorable pricing, and took advantage of it. if you are disagreeing with the word never, i would agree that the statement could be better worded for the few exceptions. However, over long periods of time, at banks, nothing is free or the best most competitive prices, their customer base is usually the least price discriminating.

[Boomer]

In the post that opened this thread, the phrase, “CDs should never be purchased” is a blanket statement.

Even though we all know that CD rates are absurd and have been that way for years, there are times when holding your nose and accepting that absolute absurdity of no ROI on CDs works best in individual circumstances.

Risk tolerance, aka, the cost of sleep, should always be assessed and addressed when it comes to investing. Investors need to understand what they are buying and why — and those who buy CDs just might know more than such a blanket statement gives them credit for knowing.

There are investors who simply cannot tolerate the market, at all, for various reasons. They know themselves and what works for them.

There also is a category of very successful stock investors who are at a point of accumulation where they throw in some CDs to preserve net worth. They might do this after selling individual stocks (with big gains) inside IRAs, where cap gains tax does not get to take a hit. This type of investor might feel like sitting tight on the stock sale cash for a while, perhaps making the choice of rolling that cash into IRA CDs or just throwing some of it into a money market to tap it as needed.

Also, there is a reason why some investors who own stocks inside Traditional IRAs might decide to sit on significant cash, even though that cash — also inside Traditional IRAs — is doing basically nothing — except waiting. . .waiting for the RMD to strike…………

Those are the investors who know never to get themselves in the position of having to sell stocks to pay taxes. Such investors also know that even if they own several Traditional IRA accounts, they can use just one of those accounts to cover the total RMD from all of them — and so they maintain a moat of cash to protect their stocks — even though they must tolerate the lack of ROI on those CDs or money markets.

There was a time when if age 59 and 1/2 was reached, a Traditional IRA CD did not charge a penalty for early withdrawal. I do not know if that is still the case, but I think it could be worth checking by anybody past that age who is thinking about Traditional IRA CDs for whatever reason.

Anyway, the point of all this is that I think CD holder-shaming with a blanket statement dismisses and/or ignores several good reasons why individual investors might decide to buy CDs.

Btw, I did not say that CD ROI would be pretty. But there are times when individual investors’ unique circumstances might include CDs. Such situations can be summed up in the words of that famous philosopher who said, “You can’t always get what you want. But if you try sometimes, well, you just might find, you get what you need.”

Boomer

[ChrisTee]

Originally Posted by rustyp

Yes - just making folks aware of a unique opportunity that exists until the end of this week in the I bond market.

You're providing good information for those who aren't aware. I bonds may be an excellent choice for many people, especially during this inflationary period.

[ChrisTee]

Originally Posted by Boomer

In the post that opened this thread, the phrase, “CDs should never be purchased” is a blanket statement.

Even though we all know that CD rates are absurd and have been that way for years, there are times when holding your nose and accepting that absolute absurdity of no ROI on CDs works best in individual circumstances.

Risk tolerance, aka, the cost of sleep, should always be assessed and addressed when it comes to investing. Investors need to understand what they are buying and why — and those who buy CDs just might know more than such a blanket statement gives them credit for knowing.

There are investors who simply cannot tolerate the market, at all, for various reasons. They know themselves and what works for them.

There also is a category of very successful stock investors who are at a point of accumulation where they throw in some CDs to preserve net worth. They might do this after selling individual stocks (with big gains) inside IRAs, where cap gains tax does not get to take a hit. This type of investor might feel like sitting tight on the stock sale cash for a while, perhaps making the choice of rolling that cash into IRA CDs or just throwing some of it into a money market to tap it as needed.

Also, there is a reason why some investors who own stocks inside Traditional IRAs might decide to sit on significant cash, even though that cash — also inside Traditional IRAs — is doing basically nothing — except waiting. . .waiting for the RMD to strike…………

Those are the investors who know never to get themselves in the position of having to sell stocks to pay taxes. Such investors also know that even if they own several Traditional IRA accounts, they can use just one of those accounts to cover the total RMD from all of them — and so they maintain a moat of cash to protect their stocks — even though they must tolerate the lack of ROI on those CDs or money markets.

There was a time when if age 59 and 1/2 was reached, a Traditional IRA CD did not charge a penalty for early withdrawal. I do not know if that is still the case, but I think it could be worth checking by anybody past that age who is thinking about Traditional IRA CDs for whatever reason.

Anyway, the point of all this is that I think CD holder-shaming with a blanket statement dismisses and/or ignores several good reasons why individual investors might decide to buy CDs.

Btw, I did not say that CD ROI would be pretty. But there are times when individual investors’ unique circumstances might include CDs. Such situations can be summed up in the words of that famous philosopher who said, “You can’t always get what you want. But if you try sometimes, well, you just might find, you get what you need.”

Boomer

Right on. You got it right!

[CoachKandSportsguy]

The point is that there are always better choices than CDs given the cut that the bank takes, regardless of the choice or reason to hold cash. The choice for holding cash is not the point, the point is what instrument do you use for the cash for return and redemption liquidity. the choice to hold cash is not in question