Random Financial Thoughts

TBIL ETF is currently at 5.11%. Good way to dip in to ETFs if you have not done so already, with the savings account money. Schwab makes it easy enough to transfer things back and forth to checking if you need it.

Money markets and HYSAs are generally just going to buy short term treasury bonds and keep a spread, probably 50bps or so. TBIL has 15bps expenses. Should be a good option if your not already set up for an easy HYSA at your current bank. The 35bp spread difference is probably not worth chasing otherwise.

You can find other treasury bond ETFs at longer durations, which in theory should have similar yields to CD rates. SHY is a 1-3 year ETF that is paying 4.60%. Again, about 50bps higher than the 24month CD rate above.

Obviously there is a little bit of interest rate risk…if rates go up, the NAV will drop, but if you hold the ETF for 2 years, that shouldn’t matter - the NAV will recover by over that time.

Not seeing much benefit in CD rates, seems like more effort and less liquid if you need to cash out.

My AmEx HYSA is at 4.25%. Sounds like some of you have better deals than that.

I got an email July 1st on the 5.5% rate. I need to make a deposit of at least $ 1000 by July 24th and then my uninvested cash will earn 5.5% ( or 0.50% + the base rate if they change the base rate) for 60 days. No thanks.

1 Like

Interest Rate Risk is quite an actuarial topic, and much is written about it.

Yes, liquidity is a meaningful consideration.

Also a meaningful consideration is the risk that your HYSA could cut its rate in half tomorrow and you would lose half the return in comparison to a CD that guarantees the rate over the life of the instrument.

I am not saying one is universally better than the other. I am saying either might be preferable given someone’s particular situation.

2 Likes

Right, I didn’t badger the person over it. I don’t think the interest rate risk over a return period of 12 months is particularly large, especially when the total return is in the range of $300 or so.

May as well just park it in the HYSA at a higher rate, and if rates drop and you got $230 instead of the $310 you expected, life happens.

But it’s not my money, so whatever.

1 Like

I hate interest.

Interest earns the worst possible tax treatment.

Full federal marginal rate plus full state marginal rate plus Obamacare tax (if applicable to you) plus local tax (if applicable).

Investors are confident the Federal Reserve will be lowering interest rates by the end of its September meeting.

As of Tuesday morning, markets were pricing in a 100% chance of an interest rate cut in September, per the CME FedWatch Tool, up from a 70% chance a month ago.

The increased confidence comes after a better-than-expected June inflation reading combined with signs of further cooling in the labor market. In sum, economists and investors alike have taken the data to mean the Fed will begin cutting interest rates soon as inflation falls closer to the Fed’s 2% target.

I feel like it might be time to dial back my holdings a bit with this announcement.

Whoa maybe it wasn’t for those exact reasons but we did get a bit of a downturn today.

Gen Z’s current average is 666, according to VantageScore.

via https://www.wsj.com/personal-finance/credit/they-turned-18-and-immediately-had-a-credit-score-over-700-9ac55992?mod=wknd_pos1
via https://archive.ph/fiSn1

1 Like

We did this just last week with live-in Goddaughter. After loaning our credit card several times to buy groceries for the house, it just made more sense. Her credit was around 715 before, I’ll try to report back in a month or two what it’s become.

1 Like

Maybe i do that for the younger (18). And ask older (25) to check credit score to see if they could get a boost.

Its almost like having parents w their financial shit together affords a young person a financial advantage (one they did not necessarily earn) by way of birth