Certificate of Deposit: Yay or Nay??

JohnnyDaJackal · 01-11-06, 09:52

Hello:
I'd like to get some of the economist's opinion on whether or not I should put a majority of my savings account into a certificate of deposit (CD)? I know pretty much nothing about economics and today's economy, so i'm a little unsure if its a wise decision or not. I am one of the people at the bank who only deposits, never withdraws from their savings account. I had though of doing it a year ago, but since I was going to buy a car, decided aganist it. Now that I have my car, and don't see myself needing money from account for quite some time, i'm wondering if nows a good time to put it in a CD. I do keep hearing from people that the market will eventually jump, which could really screw me up if my money is at a fixed interest rate.
So any advice on this topic? My one friend was telling me to put it in a mutual fund, but I'm not to sure on how they work. I'm not looking to get rich of the CD, just a little extra. I definately want the safest route, i'm not at a point where I can "gamble" with my money.
I think i'm going to sit down at the bank either tommorow or Friday, but until then any information on the topic would be greatly appreciated.

Spilchy · 01-11-06, 10:09

Well, when do you need the money (it's maturation date)? If this is money that will be used to buy a home, pay for school or buy a car, then I guess it's ok because it'll be "safe". But, you can "lose" if you're fixed at a crappy interest rate.

If this is money for retirement or to draw upon decades from now, at your age, it's pointless. You're better off with a well diversified, solid performing Large Cap mutual fund or an Index fund (better choice) that mirrors the S&P for example. You re-invest your dividends allowing it to compound. Over years, the returns will destroy that of a CD.

Do you have an IRA? If not, use the money to open one with a mutual fund(s) and contribute to it each year

Don't sell yourself short on a CD because you're not knowledgeable. The safest route as you want doesn't mean you overlook the stock market. That would be foolish at your age.

Do your folks / grandparents have a financial advisor? If so, talk to him or her. Knowledge = profitable decisions.

FalconGuy · 01-11-06, 04:10

Seth gave you good advice, if its short term ( maybe your buying a house soon) check out ING direct, 3.8% with no commitment or tying up your money. Plus if you let me refer you I get 10 bucks, and you get 25 for opening the account.

If your looking long term, your a young guy, take Seth's advice. Its not how much you make or even how much you save, if you start young it really adds up. Don't watch the market so much, over time you will do well.

If you can buy a house, the tax benefits and ability to build wealth for your future cant be beat with a house. As will Rodgers said, "Buy land, they ain't making any more of it"

A few years back my dad offered me a 9 family he owned, he has a lot of rental properties, he was going to hold the mortgage, I said I was too busy with my career. He sold that property this past December for 1.1 Mil. He offered it to me for 299K. I haven't made that much working in a highly paid aviation job over the same amount of time. Not to mention he cleared 45K a year in profits on that property every year. Im still kicking myself over that, I thought it was overpriced at 299.

When I was 17 I thought my dad was the dumbest guy on earth, now that im 37 I can say he has learned quite a bit...lol

Setec Astronomy · 01-11-06, 04:13

Wow, start with Will Rogers and finish with Mark Twain, not bad!

kompressornsc · 01-11-06, 05:26

Quote:

Originally Posted by FalconGuy

Seth gave you good advice, if its short term ( maybe your buying a house soon) check out ING direct, 3.8% with no commitment or tying up your money. Plus if you let me refer you I get 10 bucks, and you get 25 for opening the account.

So how is ING with fees? I was looking at another HY savings account, and they just nailed you on fees-like $30 per transaction, in or out. Just checked my local bank, and they're paying 90 points. Whoopee!

I can make more interest putting it under my mattress.

Mike-in-Orange · 01-11-06, 05:44

Quote:

Originally Posted by kompressornsc

So how is ING with fees? I was looking at another HY savings account, and they just nailed you on fees-like $30 per transaction, in or out. Just checked my local bank, and they're paying 90 points. Whoopee!

I can make more interest putting it under my mattress.

I've had an ING Orange Savings Account for a couple of years now and love it - no fees of any kind. Check them out at www.ingdirect.com as they also have CD accounts with even higher yields, also with no fees/minimums, and 6 to 60 month terms.

JohnnyDaJackal · 01-11-06, 06:34

Thanks for the replies, all this talk reminds me why I'm not to fond of economics.

To clarify my situation, I'm a young guy (21) and don't see any big purchases in the next couple (3-4) years of my life. I was only planning on putting my money in a CD for like 1-2 years. I think I will look into the ING account though. I know some distant family members and friends involved with banking, I guess it would be wise to try to get their opinions also. I don't want to commit to anything just yet without hearing a decent amount of opinions.

Thanks so far!

FalconGuy · 01-12-06, 02:31

If your want to do some resaerch here is a good link http://ibankdesign.com/index.php

ING is great, another good choice is Emmigrant now they have 4% interest and like ING no fees of any kind