same story everywhere re: CDs coming due

[twilight]

Gee, I've been trying to figure out what to do with my IRA which is currently in a CD which is due in a couple of weeks for renewal. Too bad I didn't buy a longer term one in 2001.

I was looking at other investments. I called up T. Rowe Price and the guy that I talked to practically interrupted me to say, "and its coming due ..." when I said the words IRA CD to him.

I wonder how many people are not renewing CDs and buying into mutual funds? Is this safe?

Damn, I'll admit it, I am confused and I haven't a clue what to do. What's the thought around here? Better safe than sorry and give it a whirl or buy a safe 3% CD? Geezzzzzzzzz !

:eyes:

:dem:

[DuctapeFatwa]

1. If you're lucky enough to have any $, get it in gold, and get it out of US

[twilight]

3. why do you say that?

and how do you unload the gold if you buy it without going through a gold dealer? I've considered this option too, but now they are keeping track of gold purchases since Patriot II ...

:grr:

:dem:

[kanrok]

7. Part of any well-balanced portfolio should be investing in:

precious metals. The best way is to get into a mutual fund that invests here. monitor and get out if the going gets rough. But really, invest for the long term. Dollar cost averaging and balance is key.

[DuctapeFatwa]

11. lifeaftertheoilcrash.net

get it out of the country first, then buy the gold, and don't unload it yet. by the time you need to unload it, you might not need to, if you know what I mean.

[amazona]

2. t. rowe price funds OK

T. Rowe Price was not involved in the current mutual fund scandal so I think you can feel confident if you go with them. I've been with them many years and I'm happy. No one is renewing CDs because the interest rates don't justify locking up your money.

[twilight]

5. that is comforting!

Yes, that is why I checked out T. Rowe Price. I had heard they were not involved in the recent mutual funds scandals. They charge bigger fees that Vanguard does, but still the same, I think would be more suited to my needs.

3% does absolutely nothing for me. Nothing ... :(

[kanrok]

4. Try tax exempt muni bonds

You'll get about the same net benefit without taxes as you would in a CD after taxes. The only problem is that the buy-in is usually fairly high, i.e, 25k minimum. I also think that it's safe to re-arrange your portfolio to jump back in. The market reached it's bottom IMHO, and a good balanced portfolio is the key now. I am a HUGE fan of buy and hold, and dollar cost averaging.

[twilight]

6. I don't need tax-exempt though

Being its an IRA, the tax status is not an issue. I had some tax-free bonds for awhile and it was a poor investment that I sold last year at only a very slight profit of 2%.

I haven't gone near the market since that time.

Hard to know what to do. ???

[kanrok]

9. Actually you do get a benefit from tax exempts in an IRA

You'll never have to pay taxes on your withdrawals. But I digress. I truly believe (I'm banking on my retirement and my kid's college fund) on hopping back into the market. In truth, I dollar cost averaged through the downturn and am doing very well.

[Frodo]

12. Warning! Correction.

Taxes on IRA withdrawals are not based on what investment type you pick. You get NO additional tax benefit from putting municipal securities into an IRA.

If the account is a Roth IRA then withdrawals can be tax-free regardless of what investments you choose and a Traditional IRA withdrawal would actually lose the tax-free-income benefit of muni securities. (Note- I'm talking federal taxes here. It's certainly possible that some states give you a pass, but I doubt it since the banks aren't asked to report income types. The paperwork would be a nightmare)

You should not invest IRA assets into munis (unless the actual rate of return is competitive with comparable term/credit non-muni bonds - which I can't imagine), or in annuities.

Twilight - The answer to your question depends alot on YOU and your tolerance for risk. But not just "market risk" of losing money in the market. Consider the risk of locking up a 3-5 year CD and having rates (and inflation) be three or four points higher in the next couple years (there's more than one way to lose money). Invest in NOTHING that you don't understand. For instance - "gold" or "gold mutual funds" are not the same thing and neither is any "safer" than some of your other options. The debates that go on here are based too much on politics and not economic principles.

Now keep in mind I'm a banker so take it with a grain of salt but...

If you are unable to determine where your investment style falls in the range of choices... consider paying a professional to help you. Or at least start with one of the financial websites (smartmoney.com or fidelity or vanguard). Most of them will have some free asset allocation/risk analysis calculators to help.

Good luck!

[twilight]

13. Frodo, thank you!

I had not thought about how a CD invested at a low rate could also be a loss.

I obviously have plenty to think about.

I already possess some older I bond and I don't want anymore of them.

You are right - IRA and taxes are not an issue unless to withdraw the money early.

Thanks for the advice! :D

twilight

:dem:

[kanrok]

16. I stand corrected

Thanks.

[still_one]

8. If you want very conservative investments

I-Bonds

TIPS, treasury inflated protected securities, Fidelity has a mutual fund of tips, FINPX

Treasury bills, Bonds, or CDs. Short term yields are not paying very much, but at least they are safe.

There are value oriented mutual funds if you are interested in equaties, but there always is some risk. Stick with either Vangard or Fidelity.

If you buy individual equaties,I would recommend the AAA large pharmecutical companies like PFE, MRK, LLY, etc.

[Wickerman]

10. A hypothetical to knowledgeable DUers

say you are responsible for managing a group's funds. You finance day to day operations with annual income. You have a series of annual CDs that mature every two months. The idea being that they are safe, get some return, but are available should you have expenses that you would need relatively qick access to. Interest income isn't necessary for the group - either in preference or survival modes. What is the best thing to do in this market? Leave in CDs and renew as they comne due? Move it out to the money market account - have it available? Rates seem comparable. Other thoughts?

[brokensymmetry]

15. In essence, you have a CD ladder.

CD ladders are good, except that with a horizon of only one year your yield is painfully small. Money markets are OK, but the yield is, again, pathetic.

I think your issues turn on how accessible the money actually needs to be, and how flexible you can be in addressing it. Size of the investment also has some bearing - I would suppose that if such short term instruments finance operations, the sum must be substantial.

You might consider a longer term CD ladder - say, one with maturities of 5,4,3,2, and 1 year. In the case of banks, you could then collateralize the CD's and borrow against them, sometimes for as little as 1% over the yield on the CD's that you pledge. Assuming (big and important assumption) that the need for funds is relatively rare, you could improve your yield a lot.

Another choice is to purchase 3 year US Treasury notes at about 2.25% and deposit them in a brokerage margin account. You could then borrow up to 90% of the face value instantly - cost of funds is somewhat higher than with the collateralized CD option, though.

Lastly, you could purchase low investment grade corporate securities - say BBB or so - the Ford Motor credit 6.95 of 2010 come to mind, currently priced just above par - and sell (or margin) them if need be. There is, of course, interest rate risk (i.e., rates go up, bond prices decline) and also credit risk (i.e., the economy tanks, and the securities default - though that seems unlikely).

[Wickerman]

18. thanks, that makes sense - gives me something to consider

We need to keep about 50% (estimated) of our total funds available for contingencies. It would make sense to have that other 50 in something that returns a tad better. Putting them in a longer term instrument is reasonable, particularly since we could collateralize if we had unforeseen expenses.

I appreciate the food for thought.

[brokensymmetry]

14. I urge you NOT to put your money into stocks.

The market is at historic highs right now, and most stock-oriented investments are very risky.

If you want gold-oriented stocks, consider a self-directed IRA invested in a diversified portfolio of gold stocks.

[KoKo]

17. Here's a link with some info for beginners. Think about Series EE Savings

Bonds. We are in a really tricky time here with other bonds, stocks and gold. If you are unsure, you probably need safety for now. Do some reading about what was recommended here. But, you can't go wrong with some in Series EE until we have a clearer picture of what's going on with the election. The huge debt and deficit are going to cause some disturbances probably right after the election.

Probably wise to go safe for the next couple of years with some portion of your savings. Good Luck!

http://beginnersinvest.about.com/cs/eesavingsbonds/