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Best brokerage to by brokered cd's with
Old 11-23-2008, 07:41 AM   #1
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Best brokerage to by brokered cd's with

I have accounts with Vanguard Fidelity and Schwab.

I would say by far that Vanguard has the most to choose from as far as brokered cd's go. Fidelity and Schwab have offerings also but no where near as many as Vanguard. Fidelity's fluctuate sometimes they have a lot sometimes they have only a small amount.

I just wanted to see if I'm missing a brokerage that has lots of CD offerings?

Jim
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Old 11-23-2008, 07:54 AM   #2
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I can report that TDAmeritrade has more than WellsFargo, but TDAM appears to have less than Vanguard. However, the list of available CDs changes daily. Sometimes drastically. You might as well not even look at the website outside of banker's hours.
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Old 11-23-2008, 08:05 AM   #3
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ETrade has a good selection. I've compared it to Vanguard and it is usually as good or better as far as rates and selection.

I definitely agree it's not worth looking at outside normal banking hours.
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Old 11-23-2008, 08:55 AM   #4
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I have been thinking of setting up a CD ladder, but don't really know how to do it. I was just going to look up various banks and start calling.

Is there a fee on these brokered CDs? Is that how everyone does it?

Also, how do you plan it out? For instance, if I need 3K per month to live on, surely I don't buy tons of 1 month CDs. Is there a system out there that has been tested by some of yall that works?

My plan is to put all my cash in CDs so I can live on that over the next 6-7 years while I wait on my equities to recover, then start spending that. I hope 6-7 years is enough time...........
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Old 11-23-2008, 09:08 AM   #5
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[quote=cardude;751833]
Is there a fee on these brokered CDs? Is that how everyone does it?

Also, how do you plan it out? For instance, if I need 3K per month to live on, surely I don't buy tons of 1 month CDs. Is there a system out there that has been tested by some of yall that works?

[quote]
I don't pay a fee through my Etrade account when they are directly with a bank but there are commissions on CDs that are being resold. I don't intend to try to shop the individual CD market with after tax money. All of my CDs are inside my IRA. I find it very easy to do brokered CDs with Etrade.

I am not currently retired but I've set my CD ladder up like I will be. I think in 6 month blocks of money so I'd theoretically only pull cash out of my IRA every six month. This is my anticipated living expenses minus a small pension I'll start receiving when I'm retired.

I also believe interest rates will go up sooner rather than later so all of my maturities are less than 2 years. It hurts a little on the yield now but I'll be able to take advantage of the higher yields if they hit as I expect. That means I have multiple 6 month blocks maturing in the same 6 month period. That's not a problem in my view because I just keep the money in a 6 month lump and roll it over as necessary.

Originally, I started with quarterly CD lumps. That created way too many CDs and it became a book keeping chore to keep up.
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Old 11-24-2008, 06:39 PM   #6
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I've compared Schwab with Vanguard relatively frequently, Vanguard seems offer slightly higher rates.
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Old 11-25-2008, 01:39 PM   #7
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I would say by far that Vanguard has the most to choose from as far as brokered cd's go. Fidelity and Schwab have offerings also but no where near as many as Vanguard. Fidelity's fluctuate sometimes they have a lot sometimes they have only a small amount.
I just wanted to see if I'm missing a brokerage that has lots of CD offerings?
I'm curious-- do the CD rates at the brokerages beat the rates at Navy Federal Credit Union, Pentagon Federal Credit Union, USAA, or other credt unions? Fidelity has never seemed to beat the CUs.
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Old 11-25-2008, 02:04 PM   #8
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There is more to a CD ladder than the yield. If you are in a Community Property State, like CA or WA, this is an important. The East Coast Banks and CU's often don't have this option. Also, simplicity has to have some importance. If you chase yield, you can end up with funds in 25 institutions. This makes taxes and keeping track of your finances a lot harder. Also, there is the 10-day window on renewal. Some banks want that notice in writing, and then want to send you a paper check, or charge you $35 for a wire, meanwhile you are losing interest on the funds.

The more assets you have, the more important simplicity becomes.
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Old 11-25-2008, 05:18 PM   #9
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I'm curious-- do the CD rates at the brokerages beat the rates at Navy Federal Credit Union, Pentagon Federal Credit Union, USAA, or other credt unions? Fidelity has never seemed to beat the CUs.
Nords,
I don't know about PFCU, but at my credit union, the CDs 1 year less pay .2% more (roughly) than what is available at Schwab, but Schwab's rates are better for 18 months and longer.

I think that the situation is a little different now with some banks looking for deposits so they can lend $.

A two year CD at PenFed is available for 3.25% APY today,
A two year at Capital One (Schwab) 4.00% APY (or 4.00% direct)

That's generally upside down from what I've seen in the past, but then, things have exactly been right side up, lately.

-- Rita
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Old 11-26-2008, 02:01 PM   #10
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You have to pay a commission on brokered CDs (duh) and the higher rates
are usually offered by banks of dubious quality.

I would stick with a high quality credit union like PenFed, who usually offers very competitive rates.

Normally, their best offering of the year occurs in December or January.

I was lucky enough to put a chunk of my IRA into a 6.25% CD (7 years)
about 2 years ago. At that time, their policy was to allow IRA CDs for persons over 59 and 1/2 to be cancelled and reinvested at a higher
rate anytime. That policy has been cancelled but they grandfathered existing IRA CDs to allow 1 step up at any time.

I love PenFed.

Cheers,

Charlie
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Old 11-26-2008, 02:05 PM   #11
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You have to pay a commission on brokered CDs (duh) and the higher rates
are usually offered by banks of dubious quality.

I would stick with a high quality credit union like PenFed, who usually offers very competitive rates.
1. Most brokerages are paid by the banks, not the buyer. Schwab for example does not charge you to buy CDs

2. There are several very good banks that sell through brokerage channels. Besides, with the FDIC coverage who cares?
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Old 11-26-2008, 02:10 PM   #12
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You have to pay a commission on brokered CDs (duh) and the higher rates
are usually offered by banks of dubious quality.
A couple of thoughts:

(1) Brokered CDs don't have to come with a commission. Some brokers receive a fee from the banks to market their CDs. That *could* result in a slightly reduced yield to make up for it, but it's not a commission.

(2) CDs from "banks of dubious quality" are still FDIC-insured. I wouldn't use a weak bank to get an extra 5 basis points of yield because that's not worth the potential hassle factor, but for an extra (say) 25 basis points or more, I definitely would.
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Old 11-26-2008, 02:12 PM   #13
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Saluki9, I guess I was thinking about after-market CDs.

Also, I think you would care very much if a bank holding your CD went
belly side up. You would get your money, but when? I think it would be a big pain in the A**.

Cheers,

Charlie
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Old 11-26-2008, 02:19 PM   #14
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Also, I think you would care very much if a bank holding your CD went
belly side up. You would get your money, but when? I think it would be a big pain in the A**.

Cheers,

Charlie
It's not, we've had it happen in some client accounts. It was probably the most seamless transaction I've ever been in that involved a government entity.

I think it took 7 business days for the FDIC to pay up, with no paperwork at all. That's the responsibility of the custodian.
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Old 11-26-2008, 02:28 PM   #15
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saluki9, I bow to your experience but not to your wisdom. Sorry if I gored your ox.

Cheers,

charlie
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Old 11-26-2008, 02:34 PM   #16
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saluki9, I bow to your experience but not to your wisdom. Sorry if I gored your ox.

Cheers,

charlie
No harm no foul, no gored ox.

I just don't want people to get the impression that if the worst happens and your bank fails that it's a terrible long experience to get you $$$ back, because it isn't.

Secondly, I don't see why when comparing identical instruments (thanks to credit insurance) you would choose the one with lower yield. We will just have to agree to disagree on that.

I would also like to add that selling brokered CDs is one of the only ways for a bank without a retail presence to gather deposits. For example Toyota Financial, GE Bank, Capital One Bank, and Morgan Stanley bank are big suppliers to that market
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Old 11-26-2008, 02:57 PM   #17
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It's not, we've had it happen in some client accounts. It was probably the most seamless transaction I've ever been in that involved a government entity.

I think it took 7 business days for the FDIC to pay up, with no paperwork at all. That's the responsibility of the custodian.
I buy FDIC cd's for my mom through her brokerage account all the time and she has only had one bank go belly up. It was paid off in a short time, no more than 10 days.
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Old 11-26-2008, 03:28 PM   #18
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I've checked at Vanguard and Schwab but their brokered CD rates don't seem to be as high as the local credit union rates. How do these rates look to yall?

Yield Rate
3 mo.2.20%2.18%
6 mo.2.50%2.47%
12 mo.3.25%3.20%
18 mo.3.50%3.445
24 mo.4.00%3.93%
30 mo.4.20%4.12%
36 mo.4.25%4.17%
48 mo.4.40%4.31%
60 mo.4.75%4.65%

How hard would it be to just do a ladder through them, and would it be that much of a hassle compared to a brokerage?

If I need 3K per month to live on, do I just buy 9K each quarter? Is that all there is to it? Or, should I buy a whole years worth of expenses at the 3.2%? I really don't think I'm grasping the whole "ladder thing".

Also, the credit union current money market rates are 2.39% for 100k, or 2.69 for over 350K. Are these money market funds guranteed 100K as well? Why would you put 350K in their money market if it was not guaranteed?

I've got 670K total cash I need to do something with, and I want it safe.

Thanks!
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Old 11-26-2008, 04:13 PM   #19
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I've checked at Vanguard and Schwab but their brokered CD rates don't seem to be as high as the local credit union rates. How do these rates look to yall?

Yield Rate
3 mo.2.20%2.18%
6 mo.2.50%2.47%
12 mo.3.25%3.20%
18 mo.3.50%3.445
24 mo.4.00%3.93%
30 mo.4.20%4.12%
36 mo.4.25%4.17%
48 mo.4.40%4.31%
60 mo.4.75%4.65%

How hard would it be to just do a ladder through them, and would it be that much of a hassle compared to a brokerage?


Thanks!
Cardude - I'm seeing higher rates through Schwab, but I am looking through the institutional site and not the retail but they should be the same.
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Old 11-26-2008, 04:49 PM   #20
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It's not, we've had it happen in some client accounts. It was probably the most seamless transaction I've ever been in that involved a government entity.

I think it took 7 business days for the FDIC to pay up, with no paperwork at all. That's the responsibility of the custodian.
I recently had a bank go under that I had a brokered CD with. It took about 10 days to get the cash in my Etrade account. I was told that the bank that takes over the deposits has a time limit to determine if they want to honor the old CD rate or refund the cash. With falling rates, you'll get the cash.
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