Question about purchasing Broker CDs at Schwab

[dmpi]

Quote:

Originally Posted by Gotadimple But it's really not all that much. And it is the cost of doing business. You would have lost a similar amount if you had an account outside Schwab and had to ACH transfer in from the outside bank with a high yield to your settlement account. The ideal would be a settlement account that pays money market rates, but you can only get that at Schwab if you have assets under management. - Rita

We're only talking a couple of bucks per day but this kind of thing encourages me to go long on the CD, so I'm not constantly buying them. Also I will look for CDs that have a closer settlement date.

[audreyh1]

Quote:

Originally Posted by dmpi Just live with the fact that I'm going to lose some interest after I sell out my SWVXX and before my first settlement date.

1 day?

[dmpi]

Quote:

Originally Posted by audreyh1 1 day?

Isn't one day to settle SWVXX so I have cash and then I order my CD which can take a week to reach first settlement day... and only then I get interest from the CD.

[pb4uski]

Quote:

Originally Posted by dmpi Just live with the fact that I'm going to lose some interest after I sell out my SWVXX and before my first settlement date.

You don't have to. You can have a negative settlement account balance, I've done it here and there with bonds where I buy a new issue today and it doesn't settle for a week or two.

So for example, let's say I have $100k in settlement and buy $100k of new issue bonds that don't settle for 12 days. At that point, my settlemnt account shows as $100k beginning balance less $100k purchase for the bonds. I can call my broker and he can buy $100k of SWVXX even though my settlement account is $0. After that purchase I have $100k of SWVXX and my settlement account shows a balance of MINUS $100k, so they net to $0.

I just need to remember to sell $100k of SWVXX the day before the bond purchase settles. I usually set up a reminder on my calendar.

I've done if numerous times for bonds. Never for CDs but I would think you could do it for CDs too.

That way for that 12 days the $100k is earning the SWVXX yield rather than 0.4% of $0. Only about $150 but still an easy $150... just need to call my broker and do an online transaction later... 15 minutes work.

[MarieIG]

TD Ameritrade (merging with Schwab) makes you hold money in their stinkin sweep account for limit orders on stock. That's one benefit of Vanguard which currently pays decent interest on their sweep account.

With regard to bonds, I haven't place an order before the money cleared, but if they like Vanguard, as long as the money shows up before the settlement date, the order goes through. (I just did that last week at Vanguard and had a negative balance in my settlement account for a bit.)

[dmpi]

Quote:

Originally Posted by pb4uski You don't have to. You can have a negative settlement account balance, I've done it here and there with bonds where I buy a new issue today and it doesn't settle for a week or two. So for example, let's say I have $100k in settlement and buy $100k of new issue bonds that don't settle for 12 days. At that point, my settlemnt account shows as $100k beginning balance less $100k purchase for the bonds. I can call my broker and he can buy $100k of SWVXX even though my settlement account is $0. After that purchase I have $100k of SWVXX and my settlement account shows a balance of MINUS $100k, so they net to $0. I just need to remember to sell $100k of SWVXX the day before the bond purchase settles. I usually set up a reminder on my calendar. I've done if numerous times for bonds. Never for CDs but I would think you could do it for CDs too. That way for that 12 days the $100k is earning the SWVXX yield rather than 0.4% of $0. Only about $150 but still an easy $150... just need to call my broker and do an online transaction later... 15 minutes work.

I tired this again. This time I managed to put my CD order in without having sufficient funds. I swear this didn't work the last time I tried this. I didn't see my balance go negative probably because this is after hours. I'm going to try to do what you did and sell out SWVXX just before settlement. We'll see what happens.

[brucethebroker]

Personally, concern about losing one day of interest when purchasing a CD is like worrying about waiting awhile longer for 5.0% when 4.9% is available today. Not being critical, it's just that it is easy to lose the big picture, which is having high MM and CD rates today (such a blessing) compared to a year ago. I try hard not to second guess &/or sweat the small stuff.