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Minimum Return on Safe Investment
Old 05-16-2014, 12:16 PM   #1
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Minimum Return on Safe Investment

I am looking at various options for investing, where can I find out what the minimum safe return I can get is? The idea is that I should expect a rate of return higher than this for any investment I can get into, because otherwise I can take the safe, low-risk investment.

I am thinking something like a 10-year treasury bond (US) so that it is government backed. I can look at this and CD rates. But where can I actually check to see what return I would get if I purchased a 10-yr treasury bond and held it to maturity?
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Old 05-16-2014, 12:22 PM   #2
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If you are 100% sure you are holding to maturity, I would consider a brokerage CD. Ten year ones are available through Vanguard at 3.35%, which is over 75 basis points better than a 10 year treasury currently is paying. Government insured, also.


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Old 05-16-2014, 12:30 PM   #3
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Try this to understand treasuries:

Making Sense of Treasury Securities: Treasury Bills, Notes, and Bonds - The Simple Dollar

This for current rates
Daily Treasury Yield Curve Rates
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Old 05-16-2014, 12:39 PM   #4
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In deciding you need to consider liquidity as well as safety and yield.

A 10 year treasury or a brokerage CD have interest rate risk - if you need that money prior to maturity you could end up with a loss if interest rates have increased since you bought it.

Bank CDs have an early withdrawal penalty of 6-18 months worth of interest.

Online FDIC insured savings have no credit risk and great liquidity, but low yields.

Pick your poison.
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Old 05-16-2014, 12:49 PM   #5
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Originally Posted by inquisitive View Post
I am looking at various options for investing, where can I find out what the minimum safe return I can get is? The idea is that I should expect a rate of return higher than this for any investment I can get into, because otherwise I can take the safe, low-risk investment.

I am thinking something like a 10-year treasury bond (US) so that it is government backed. I can look at this and CD rates. But where can I actually check to see what return I would get if I purchased a 10-yr treasury bond and held it to maturity?
Look at the interest rate to maturity on the day that you plan to buy.
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Old 05-16-2014, 07:22 PM   #6
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Treasury bonds still leave you exposed to inflation risks. If you want to get rid of that, you can look into TIPS. The yields are definitely discouraging.

Treasury Inflation-Protected Securities (TIPS) - Markets Data Center - WSJ.com
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Old 05-17-2014, 08:22 AM   #7
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Consider series I Savings Bonds.
Safe, adjusts for inflation, has been beating online savings accounts and most CDs up to 5 years, plus you can sell without penalty after 5 years.
Current rate is 1.94%
Adjusts every 6 months.
Lots more here:
https://www.treasurydirect.gov/indiv...res_ibonds.htm
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Old 05-17-2014, 08:47 AM   #8
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Consider series I Savings Bonds.
Safe, adjusts for inflation, has been beating online savings accounts and most CDs up to 5 years, plus you can sell without penalty after 5 years.
Current rate is 1.94%
Adjusts every 6 months.
Lots more here:
https://www.treasurydirect.gov/indiv...res_ibonds.htm
Depending on your circumstances (size of portfolio) isn't the issue with I-Bonds the $10K purchase limit per person per year? Or am I missing something?
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Old 05-17-2014, 09:42 AM   #9
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Depending on your circumstances (size of portfolio) isn't the issue with I-Bonds the $10K purchase limit per person per year? Or am I missing something?
You are correct.
Whether the 10K limit is an issue depends on what the individual is trying to accomplish.
If you are looking for a "single" resting place for a large amount, then not so good.
If you want to ladder for say 10 years, then I Bonds can be a nice addition to a portfolio.
But again, the issue here is safety, as in 100%. If we open the door for more risk, then I-Bonds quickly pale.
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Old 05-18-2014, 09:05 AM   #10
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For unrestricted safe investment I'd go with online savings accounts for something close to 0.90% interest. No time periods to worry about.
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Old 05-18-2014, 09:21 AM   #11
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If your definition of "safe" is something that does not lose money, then the 10 year bond would be a good baseline. But if it includes the risk of not keeping up with inflation, the I bond rate might be a good starting point. Also need to consider liquidity, if that is important to you.
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Old 05-18-2014, 10:22 AM   #12
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Personally I don't get government bond for income. I can understand government bonds for trading, mf, or holding for short term. If you want safety and income use annuity or utility's stocks or their bonds. Tell me that I am wrong because I am doing the later for asset allocation instead of bonds .
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Old 05-18-2014, 11:04 AM   #13
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If you are 100% sure you are holding to maturity, I would consider a brokerage CD. Ten year ones are available through Vanguard at 3.35%, which is over 75 basis points better than a 10 year treasury currently is paying. Government insured, also.


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Wow, what a deal!
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Old 05-18-2014, 12:15 PM   #14
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Wow, what a deal!

Yes, it's a quick safe path to instant wealth! My initial "low interest rate environment" CDs will start to mature this fall. If nothing changes, I will start putting these in the 10 yr. brokerage CDs. Partially to increase my return, and partially to lock in so I don't waste any more time waiting to see if interest rates will go up.


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Old 05-18-2014, 01:12 PM   #15
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If you are 100% sure you are holding to maturity, I would consider a brokerage CD. Ten year ones are available through Vanguard at 3.35%, which is over 75 basis points better than a 10 year treasury currently is paying. Government insured, also.


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Good deal so long as a reasonable escape hatch exists when Mr Inflation starts to call.. 3.35% looks good--10 years a little scary.
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Old 05-18-2014, 05:15 PM   #16
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Partially to increase my return, and partially to lock in so I don't waste any more time waiting to see if interest rates will go up.
+1. Investing in CD ladders is on our to do list. 3.75 sounds like a good place to start our research. Thanks for the suggestion.
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Old 05-18-2014, 08:33 PM   #17
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Good deal so long as a reasonable escape hatch exists when Mr Inflation starts to call.. 3.35% looks good--10 years a little scary.

I have actually about as much of my money in IBonds as I do CDs, so maybe that will help if it does happen. But I'm not real worried about inflation as I only spend about 60% of my monthly pension income and it will drop to 50% after I get this darn college bill whittled away. I'm more worried about losing money than making any. So every dollar I can stuff in a CD is one less dollar I will be tempted to invest with.


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