Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Saftey of CD's vs. treasury bonds?
Old 07-09-2008, 05:38 AM   #1
Recycles dryer sheets
 
Join Date: Jul 2007
Posts: 346
Saftey of CD's vs. treasury bonds?

Are Treasury bonds and other treasury products really that much safer than buying CD's?

It seems that you can get better interest rates on CD's and have the FIDC insurance on them.

Just wanted to see what others thought.

Jim
__________________

__________________
summer2007 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-09-2008, 06:24 AM   #2
Thinks s/he gets paid by the post
OAG's Avatar
 
Join Date: Jun 2006
Location: Central, Ohio, USA
Posts: 2,598
I agree. FDIC/NCUA Insured CD's have been safe for me over more than the past 30 or so years and have always provided the best rates. Currently maintain a CD ladder going out about 7 years with a combined average rate of 5.7%. Hard to match that rate currently but long term CD rates still beat the Treasury products.
__________________

__________________
Vietnam Veteran, CW4 USA, Retired 1979
OAG is offline   Reply With Quote
Old 07-09-2008, 12:50 PM   #3
Recycles dryer sheets
bamsphd's Avatar
 
Join Date: Nov 2005
Posts: 337
From a simple "will I someday get back the same number of dollars I invested?" point of view, I don't think there is a noticeable difference in safety between FDIC insured CDs and US Treasuries.

I think which makes more sense depends on how much you are investing, how likely you are to want your money early, how settled the markets are at the time you invest, how high your state taxes are, how broadly you search for high CD rates, and how well you remember stagflation.

Obviously if you exceed the FDIC limits then Treasuries are safer, unless you invest through lots of different banks which can be a hassle.

If you unexpectedly want your money early, I personally think Treasuries "on average" win, since you at most only lose "on average" the commission and spread. Though if you are investing very small amounts the commission can be significant. Since your bond is now a shorter term bond paying a longer term coupon, you have a real chance at making money by cashing out early. Since treasuries tend to do well during financial crisis which also increase your need to sell the treasuries early, again you have fair odds of making a profit. CD's always have a penalty for bailing early. However, if you prefer the certainty of a less attractive deal, to good odds of a better deal, then CDs are the way to go.

The flip side of treasuries doing well during a financial crisis is that they tend to be relatively poor purchases during a financial crisis. They are certainly "not on sale" as I write this.

Treasuries are immune to state and city income taxes, which may or may not be an issue in your situation.

If you use the web to search for the best CD rates, I think you can often compete with treasuries of the same duration. However, I consider treasuries to be more liquid, so it is a bit of an apple/oranges comparison.

While treasuries are usually treated as risk free and totally liquid, never underestimate the ability of politicians to mess things up. A game of chicken between congress and the president could at least cause a temporary hiccup in the treasury markets. While if you spread your CDs across multiple banks, the odds are good at least some of them will always have their doors at least part way open.

TIPs are much safer in the face of possible inflation spikes than CDs or conventional treasuries. However, as always, safer investments don't pay as well, except when bad things happen to the less safe investments.

Both investments are very conservative and pretty darn safe from anything but inflation. However, you don't have to pick. You can also build a mixed ladder of CDs, conventional treasuries and TIPs if you want extreme safety. Even with safe investments, diversification can be a good idea.
__________________
bamsphd is offline   Reply With Quote
Old 07-11-2008, 03:30 AM   #4
Recycles dryer sheets
 
Join Date: Jul 2007
Posts: 346
Thanks OAG and bamsphd

That gives me some things to think about.

The 5.7% is great!

I didn't think about how much more liquid the treasuries are until you mentioned it.

I have been looking at the CD's offered on the online brokers...I invested in retirement accounts last year and all I did was loose like 10%+ so far! So even 4% would be like 14-15% better than what I did with that.

Jim
__________________
summer2007 is offline   Reply With Quote
Old 07-11-2008, 10:10 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
I think the short answer is that if you fail to get your money back on either one, getting your money back probably isnt going to be everyones biggest problem...
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Old 07-11-2008, 10:14 AM   #6
Thinks s/he gets paid by the post
saluki9's Avatar
 
Join Date: Feb 2005
Posts: 2,032
Quote:
Originally Posted by cute fuzzy bunny View Post
I think the short answer is that if you fail to get your money back on either one, getting your money back probably isnt going to be everyones biggest problem...

That about covers it. If this is a real concern I would suggest investing in a box of MREs and a crate of ammunition.
__________________
saluki9 is offline   Reply With Quote
Old 07-11-2008, 10:15 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Neither one tastes very good.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Old 07-11-2008, 10:23 AM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Quote:
Originally Posted by saluki9 View Post
That about covers it. If this is a real concern I would suggest investing in a box of MREs and a crate of ammunition.
You forgot gold! gold!!! GOLD!!!!!!!
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 07-11-2008, 10:23 AM   #9
Thinks s/he gets paid by the post
saluki9's Avatar
 
Join Date: Feb 2005
Posts: 2,032
Quote:
Originally Posted by cute fuzzy bunny View Post
Neither one tastes very good.
True, but one of them can help you figure out how the neighbor's food tastes.
__________________
saluki9 is offline   Reply With Quote
Old 07-11-2008, 10:26 AM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Quote:
Originally Posted by saluki9 View Post
True, but one of them can help you figure out how the neighbor's food tastes.
Their MREs probably won't taste any better than yours.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 07-11-2008, 10:53 AM   #11
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
Quote:
Originally Posted by cute fuzzy bunny View Post
I think the short answer is that if you fail to get your money back on either one, getting your money back probably isnt going to be everyones biggest problem...
Precisely.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 07-11-2008, 11:14 AM   #12
Thinks s/he gets paid by the post
saluki9's Avatar
 
Join Date: Feb 2005
Posts: 2,032
Quote:
Originally Posted by brewer12345 View Post
Their MREs probably won't taste any better than yours.

Dog?
__________________
saluki9 is offline   Reply With Quote
Old 07-11-2008, 11:35 AM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Quote:
Originally Posted by saluki9 View Post
Dog?
Eat a man's dog and you feed yourself once. Hunt with a man's dog and you feed yourself forever.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 07-11-2008, 11:36 AM   #14
Thinks s/he gets paid by the post
 
Join Date: Dec 2007
Posts: 4,764
Quote:
Originally Posted by brewer12345 View Post
Eat a man's dog and you feed yourself once. Hunt with a man's dog and you feed yourself forever.
New sig material..
__________________
Notmuchlonger is offline   Reply With Quote
Old 07-11-2008, 11:36 AM   #15
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,613
Quote:
Originally Posted by brewer12345 View Post
Eat a man's dog and you feed yourself once. Hunt with a man's dog and you feed yourself forever.
Or for another eight years when the dog dies of old age.

That's 56 to you and me.
__________________

__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Treasury Bonds, help with basics... OldAgePensioner FIRE and Money 65 01-15-2010 07:49 PM
Muni Bonds - Calif State University Revenue Bonds - 2008A. Disappointed FIRE and Money 0 03-24-2008 10:25 PM
Any Reason for Short-Term Bonds Through Treasury Direct? emilylynn FIRE and Money 2 01-06-2008 10:25 AM
Paper Savings Bonds -- Treasury Direct bongo2 FIRE and Money 2 08-04-2006 02:48 AM
30-Year Treasury Bonds Are Back retire@40 FIRE and Money 3 08-08-2005 09:46 AM

 

 
All times are GMT -6. The time now is 11:10 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.