Does this investment exist?

[ordway]

The more liquidity there is in an investment, generally the less return you'll have. (I'm talking about safe/conservative investments here.) For example, CDs pay more than savings accounts, and in turn you have to pay penalties if you withdraw your money before the term is up.

Is there a "next step up" in that kind of thing? Ie. an investment where you *really commit* your money for a specified term, like 5 years, and *cannot* get it back, but in return you get a guaranteed higher rate of return than for something like a CD?

It just seems like a bank would benefit from having *guaranteed* use of my money for a certain period of time, and so could pay a corresponding higher interest rate than a CD or money market.

Is there such a creature? Or is there just no demand for that, as there are too few people who could really, honestly put $X into an investment and *not be able* to get it out for a certain amount of time?

The only bank which I've recently read about that offers a "can't touch till maturity CD" is Millennium Bank.

http://www.millenniumbankandtrust.com/prem_cds.html

They don't have FDIC insurance since they are not a US bank, but the interest rates look good.

[wabmester]

Quote:

Is there a "next step up" in that kind of thing? Ie. an investment where you *really commit* your money for a specified term, like 5 years, and *cannot* get it back, but in return you get a guaranteed higher rate of return than for something like a CD?

I know what you mean, but I've never seen such a thing. Banks are heavily regulated, and I wouldn't be surprised if they had to give you an early withdraw option. Even if it were optional, I'm not sure you'd get much of a premium.

Have you looked at zero-coupon bonds? If you have a specific term and you're not looking for an income stream, you might be able to get a little more juice from a zero.

I went with long term Freddie Mac notes. Got 5%
for the first 5 years, then the rate automatically
increases unless they call them. Figured it was safe as a CD and paying 1% more (at the time). Of course you have NAV risk which you don't have with CDs. So far, so good.

John Galt

[Jarhead*]

Quote:

The only bank which I've recently read about that offers a "can't touch till maturity CD" is Millennium Bank. http://www.millenniumbankandtrust.com/prem_cds.html They don't have FDIC insurance since they are not a US bank, but the interest rates look good.

The can't touch till maturity part I would have no problem with.
They are paying 6.25 for one year. 7.00 for 3 years
7.75 for 5 years, 8.00 for 7 years. With a 100,000 deposit, add almost a point (.75) to above figures.
What would bother me is with no FDIC insurance, they are paying close to double what domestic banks are paying, and if we don't get the hike in interest rates, they are apparantly expecting, you could find yourself on the short end of a "out of business" sale.
They could have a perfectly plausable business plan, but
on the outset, appears to be on the scary side, risk wise.