# CDs Remain Useful Despite Low Yields



## SeaBreeze (Nov 23, 2017)

We have some CDs along with IRAs, they are a safe and stable investment although the yields these days are very low.  More HERE.



> Many investors, probably most, start as a child with a simple bank account. Later come stocks, bonds and funds, with bank accounts mainly used for everyday expenses. They're safe and convenient but don't pay much.
> 
> A top-yielding certificate of deposit might pay a bit  more than 2 percent if you're willing to tie your money up for five  years, for example, while the Dow Jones industrial average is up more than 18 percent since the start of the year.
> 
> ...


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## Aunt Bea (Nov 24, 2017)

I'm very insecure when it comes to money and investments so I tend to keep more cash on hand than most _investment professionals _recommend.  When rates were better I kept my cash in a ladder of CD's with a little something coming due every six months to a year.  These days, with the low rates, I keep my cash in a money market account.  I know that keeping cash may cost me some potential income and growth but you can't put a price on peace of mind.

_J.P. Morgan once had a friend who was so worried about his stock  holdings that he could not sleep at night. The friend asked, ‘What  should I do about my stocks?’ Morgan replied, ‘Sell down to your  sleeping point’ Every investor must decide the trade-off he or she is  willing to make between eating well and sleeping well. High investment  rewards can only be achieved at the cost of substantial risk-taking. So  what is your sleeping point? Finding the answer to this question is one  of the most important investment steps you must take.– _Burton Malkiel


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## rkunsaw (Nov 24, 2017)

CD rates are just too low. When we get too much in our bank account I invest in quality companies that have a record of paying good dividends. I try to buy when the price is low but that isn't a prime concern. The price of the stock will go up and down but it's the dividends that make money for you.


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## NancyNGA (Nov 24, 2017)

I gave up on CD's a long time ago, but have one little one that I keep missing the maturity date to cancel.   When it rolled over the first time I *think* they changed it to a 5 year, but I could be wrong.  Anyway it's 5 years now.  

Can you go to a bank any time and arrange to have one terminated the *next* time it comes due?


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## Aunt Bea (Nov 24, 2017)

NancyNGA said:


> I gave up on CD's a long time ago, but have one little one that I keep missing the maturity date to cancel.   When it rolled over the first time I *think* they changed it to a 5 year, but I could be wrong.  Anyway it's 5 years now.
> 
> Can you go to a bank any time and arrange to have one terminated the *next* time it comes due?



Not sure.

My bank always sends a thirty day renewal notice explaining the new rates and terms.

I would ask if they will allow you to cash it in and wave the penalty.  The rates are so low these days that even paying the penalty wouldn't sting too much.


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## SeaBreeze (Nov 24, 2017)

NancyNGA said:


> I gave up on CD's a long time ago, but have one little one that I keep missing the maturity date to cancel.   When it rolled over the first time I *think* they changed it to a 5 year, but I could be wrong.  Anyway it's 5 years now.
> 
> Can you go to a bank any time and arrange to have one terminated the *next* time it comes due?



There usually a one week grace period when a CD matures and changes can be made to it or it can be withdrawn without penalty.  We usually get a notice in the mail beforehand, telling us the time is approaching.  We also keep a list on paper at home that shows maturity time on our CDs, so we can check on that whenever we like easily.    The most the bank would have done if you didn't contact them with any directions, is to renew it at it's current term, so if it's a 5 year, then it would be renewed as a 5 year CD. It's always been like that for our CDs.

The only time you can terminate a CD or withdraw the full amount and close it, receiving a check for the full balance, without penalty at all, is at the time of the maturity date.  So, as far as I know, you just can't go into a bank at any time and tell them what to do when the maturity date rolls around.  Once it matures, you can make whatever changes you like with no penalty.

If you desperately need the money immediately, you can cash it in before maturity, paying a penalty.  I would contact the bank and find out what the penalty would be first before doing something like that.  We've always waited until the CD matured before doing anything with it.  More about it HERE.

I don't like doing anything with stocks, to me it's like gambling and I don't have the kind of money that I want to play with.  I know a couple of people who lost big investing in stocks, don't want to lose any of my hard earned money, not when I was younger and definitely not now in my old age.


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## NancyNGA (Nov 24, 2017)

Aunt Bea said:


> .... The rates are so low these days that even paying the penalty wouldn't sting too much.


Great idea! I can't seem to get out of that "save a penny to lose a dollar" mentality without someone kicking me sometimes. I'm tired of thinking about it. 

It would gain that loss back in a short while in a good conservative mutual fund. I think ours only gives a 10 day notice.  It just came due at a very inconvenient time last time.


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## mathjak107 (Nov 25, 2017)

a penny saved is a penny earned  but alas it will always be a penny . in order to  grow money you need growth vehicles  for longer term money . i would never keep more than current year spending and a bit of an emergency fund in cd's


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## ShokWaveRider (Dec 3, 2017)

I am a CD fan, I am like the stock market. I hate uncertainty. I have my PenFed CD's maturing in December of 2019, they are at 3% currently. I hope there is a comparable rate then.


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## mathjak107 (Dec 3, 2017)

with the gains the markets have seen the last 8 years we can lose 1/2 our money and still blow cd's out of the water . that is why after a while the dips mean little .

had we not invested we would be farther behind then the dip would leave us  and recoveries rarely take long .


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## SeaBreeze (Dec 3, 2017)

ShokWaveRider said:


> I am a CD fan, I am like the stock market. I hate uncertainty. I have my PenFed CD's maturing in December of 2019, they are at 3% currently. I hope there is a comparable rate then.



I'm like you ShokWaveRider, don't have a lot of money, but what I do have I worked hard to earn and save....don't like the idea of gambling with it and taking chances in my old age for sure.  Have some CDs and IRAs at PenFed too.


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## mathjak107 (Dec 3, 2017)

gambling is not investing .

in fact gambling would be trying to draw 4% inflation adjusted from just fixed income  in retirement .fixed income failed more than half the 117 rolling 30 year time frames we had here in the states  . a 50/50 mix has a 96% success rate . anything under 90% success rate is to risky to use . odds are a pay cut will be likely .

in fact here has never been a typical retirement time frame where a 50/50 ever lost money .


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## ShokWaveRider (Dec 4, 2017)

With interest rates at 3% or above we live like Kings, why do we need to risk out nest egg for just the extra that we will never spend? no Kids or family to leave anything to. When we kark it, all our stash goes to the blind dogs.


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## mathjak107 (Dec 4, 2017)

the answer is it all depends on how much of a percentage your draw is and for how many years will you plan around.

if you are planning around drawing 4% a year inflation adjusted then fixed income only has had a 45% chance of  lasting 30 years . it has failed to last more than 1/2 the 117 rolling 30 year periods we have had to date .

50/50 has made it through 95% of all time frames . anything under 90% is considered way to risky .

if you tell me you are  drawing 3% or so  i would agree you need a minimal amount of a growth vehicle .

because of inflation and sequence risk the exact same average rate of inflation and returns can have up to a 15 year difference  in how long the money last just based on the order of gains and losses . fixed income is subject to negative real returns which can drastically cut how long the money last .


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## mathjak107 (Dec 5, 2017)

here is a nice success rate chart showing how the various allocations did  so far . you want at least a 90% success rate .that means you would have made it through at least 90% of the time frames without running out of money .

you can see that the results are the opposite . the more conservative you are  the higher the risk  of running out of money  at any given draw rate .once you get around a 4% draw fixed income  is way to risky to support 30 years in retirement . . you need at least 40% equities to stand a good chance of making it through the worst case scenario's  we have had .

being to conservative has  been responsible for more  financial failure ,without taking a pay cut  f than being to aggressive has . even at 65 we have money we will not be eating with for possibly 20 to 30 years . that is still long term money .


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## Aunt Bea (Dec 5, 2017)

mathjak107 said:


> here is a nice success rate chart showing how the various allocations did  so far . you want at least a 90% success rate .that means you would have made it through at least 90% of the time frames without running out of money .
> 
> you can see that the results are the opposite . the more conservative you are  the higher the risk  of running out of money  at any given draw rate .once you get around a 4% draw fixed income  is way to risky to support 30 years in retirement . . you need at least 40% equities to stand a good chance of making it through the worst case scenario's  we have had .
> 
> being to conservative has  been responsible for more  financial failure ,without taking a pay cut  f than being to aggressive has . even at 65 we have money we will not be eating with for possibly 20 to 30 years . that is still long term money .



Thanks for the chart!

It makes me feel better to know that even if I substantially up my withdrawal rate in the final years of my life I have a good chance of making it across the finish line with a few bucks in the bank!

This topic makes me think back to when I started working at my first real job in 1974.  At that time the Dow Jones Industrial Average was well below 1,000 and today it has grown to 24,290 plus over 40 years of dividends.  It has had a slow and at times bumpy climb over the years but it is a good example of what conservative investing over time can do for the average person.


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## mathjak107 (Dec 5, 2017)

it is a good example of what any investing can do and even a greater example of how even being aggressive smooths out over time and ends up being volatile but almost very little risk over long periods of time .

like i said even at 65 you still have money that won't be needed for 20-30 years . that is still long term money


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## rkunsaw (Dec 5, 2017)

I'll be 76 in a few days and I haven't started withdrawing, in fact we're still adding to our investments. CDs don't even keep up with normal inflation at today's rates. Sure the money is safe but it's worth less when it matures than it was when you put it in.


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## retiredtraveler (Dec 5, 2017)

"...There is a nice success rate chart showing how the various allocations did  so far . you want at least a 90% success rate .that means you would have made it through at least 90% of the time frames without running out of money...".

I agree with the sentiment, but I really dislike relying on charts that use 'standard' algorithms to tell you how much you can withdraw, or what you're investing mix should be. Wife and I early retired and before doing so, we tracked our expenses for several years, quite literally, to the penny. We then did the best we could to project and amortize future expenses. It has been shown, in many studies, that people vastly underestimate their living expenses. They forget about including the $10,000 for a new roof on their house, or the $500 a year for maintenance/repairs to their car (along with all sorts of other expenses if you have a house and car).
   If you're going to be conservative and invest through CD's which provide little income, then be very conservative and put in the time and effort to really assess your finances.


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## Aunt Bea (Dec 5, 2017)

retiredtraveler said:


> "...There is a nice success rate chart showing how the various allocations did  so far . you want at least a 90% success rate .that means you would have made it through at least 90% of the time frames without running out of money...".
> 
> I agree with the sentiment, but I really dislike relying on charts that use 'standard' algorithms to tell you how much you can withdraw, or what you're investing mix should be. Wife and I early retired and before doing so, we tracked our expenses for several years, quite literally, to the penny. We then did the best we could to project and amortize future expenses. It has been shown, in many studies, that people vastly underestimate their living expenses. They forget about including the $10,000 for a new roof on their house, or the $500 a year for maintenance/repairs to their car (along with all sorts of other expenses if you have a house and car).
> If you're going to be conservative and invest through CD's which provide little income, then be very conservative and put in the time and effort to really assess your finances.



I think that is great advice for everyone to follow!


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## mathjak107 (Dec 6, 2017)

retiredtraveler said:


> "...There is a nice success rate chart showing how the various allocations did  so far . you want at least a 90% success rate .that means you would have made it through at least 90% of the time frames without running out of money...".
> 
> I agree with the sentiment, but I really dislike relying on charts that use 'standard' algorithms to tell you how much you can withdraw, or what you're investing mix should be. Wife and I early retired and before doing so, we tracked our expenses for several years, quite literally, to the penny. We then did the best we could to project and amortize future expenses. It has been shown, in many studies, that people vastly underestimate their living expenses. They forget about including the $10,000 for a new roof on their house, or the $500 a year for maintenance/repairs to their car (along with all sorts of other expenses if you have a house and car).
> If you're going to be conservative and invest through CD's which provide little income, then be very conservative and put in the time and effort to really assess your finances.




standard algorithms ?   no such thing used in this chart or in any good calculator .


if you were building a house and wanted it to stand up to the worst hurricanes your area ever saw you can easily build to standards   that can withstand the worst conditions you ever had and then some .

charts like the above and good calculators simply take the WORST retirement time frames we have had to date and simply give you a spending level that made it through the number of years you are stress testing for .

there is no algorithm's going on ,. it is just simply stress testing the worst of the past  , rolling time frame by rolling time frame  which to date have had time frames worse than anything we have seen the last 50 years .

so as an example here is the results of 100% fixed income , drawing 4% inflation adjusted over 30 years .

FIRECalc looked at the 117 possible 30 year periods inthe available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared ineach of the117cycles. The lowest and highest portfolio balance at the end of your retirement was $-517,560to $2,349,575, with an average at the end of$187,979. (Note: this is looking at all the possible periods; values are in terms of thedollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio wasdepleted before the end of the 30 years.FIRECalc found that 64 cycles failed, for a success rate of 45.3%.


here is 50/50


FIRECalc looked at the 117 possible 30 year periods inthe available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared ineach of the117cycles. The lowest and highest portfolio balance at the end of your retirement was $-223,952to $4,145,063, with an average at the end of$1,136,507. (Note: this is looking at all the possible periods; values are in terms of thedollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio wasdepleted before the end of the 30 years.FIRECalc found that 6 cycles failed, for a success rate of 94.9%.

and for those that think being 100% equities in retirement  is risky , here is how you would have done with 100% equities (diversified funds ,not individual stocks )

100% equities 

FIRECalc looked at the 117 possible 30 year periods inthe available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared ineach of the117cycles. The lowest and highest portfolio balance at the end of your retirement was $-931,017to $8,509,297, with an average at the end of$2,691,022. (Note: this is looking at all the possible periods; values are in terms of thedollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 30 years.FIRECalc found that 8 cycles failed, for a success rate of 93.2%.


which allocation , over and over would  you think would have been given you your worst odds for  running out of money ?????????????????????   correct , 100% fixed income if you wanted around 4% or so .

but the math is much more useful that is derived from the above .

studying the results , you need at least a 2% real return (after inflation ) over the first 15 years  of a retirement . to maintain 4% inflation adjusted spending mathematically  . every single time frame that failed failed because the first 15 years averaged less than a 2% real return .

no matter how good things got after the 15 year mark , it was to little to late to save things without taking a pay cut .

so if you are drawing about 4% and 5 years in you are averaging less than a 2% real return a red flag should go up . by 10 years you better start taking pay cuts .

so these charts are not based on averages , expected returns or the best markets . they are simply building your portfolio to withstand the worst conditions we have had to date . anything better is a plus and merely  increases your odds .

once you consider life expectancy statistics , few of us will last 30 years in retirement so that adds to the success rate of the portfolio success rate making it even more likely the draw will hold just fine even under worst conditions .


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## retiredtraveler (Dec 6, 2017)

I'm still not understanding how useful these numbers are. I understand that they are based on a single stock asset class being the S&P. Then, a single bond class of gov't intermediate term. I could endlessly argue that the numbers are too simplistic, and argue that inflation numbers are pretty useless. I also don't subscribe to the idea that even though so many scenarios have been taken over a long period of tine, the markets, micro and macro economy, and inflation, have changed drastically over the decades. 
   I just don't see this as being very helpful going forward. It's certainly better than nothing, but again, one needs to really look at their personal finances, mostly their expenses (and assumed expenses later in life). Then you have to decide if the S&P is a good representation of all the variations in the equity asset class, along with all the variations in the bond asset class.


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## mathjak107 (Dec 6, 2017)

but the math that comes out of these studies and calculators and the  worst case scenario's is timeless and  it is very relevant . you cannot get 4% withdrawals  mathematically to hold up without getting at least a 2% real return average with  ANY ASSET CLASSES  over the first 15 years .

that is the bottom line to all the stress testing of the rolling periods of time .

although the original studies were stocks and bonds , the high speed numbers   crunching of those  assets were able   to give us a  mathematical number we can hang our hats on .

so any assets you care to use , must return an average of a 2% real return the first 15 years since that was the common denominator  behind every failing time frame .

every failing time frame had an average 30 year outcome return wise  , but they all failed in the first 15 years  when spending down and got less than a 2% real return .

even the greatest bull market in history could not save the 1965 and 1966 group .


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## HiDesertHal (Dec 7, 2017)

My financial adviser suggested I buy a CD to diversify my retirement funds,  so I bought one for $22k, to be held for 2 years.

HDH


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## mathjak107 (Dec 7, 2017)

i keep 1 years spending money in a money market and cd's . the rest goes in to an income portfolio that consists of 5 assorted funds with a time frame of being needed in 2 years to 6 years  or so .

all the rest goes in to a 60/40 growth and income model .


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## KingsX (Dec 18, 2017)

ShokWaveRider said:


> *I am a CD fan... *




Me too.  No matter how low the interest rates are, your money always increases in value.

Playing the stock market is a game of chance. You might be in the process of winning big... but you haven't really won until you cash in your chips.


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## mathjak107 (Dec 19, 2017)

KingsX said:


> Me too.  No matter how low the interest rates are, your money always increases in value.
> 
> Playing the stock market is a game of chance. You might be in the process of winning big... but you haven't really won until you cash in your chips.


just the opposite . after inflation  cd's have LOST MONEY  almost 50% of the time the last 50 years .

that is a serious issue over the long term .

in the mean time a balanced portfolio has ALWAYS  been up and been up nicely over   the typical 30 year retirement or accumulation stages .  which one is really the riskiest ?

playing the stock market ?  perhaps if you are a speculator  and invest in individual stocks trying to find the next apple . but diversified funds is  NOT  playing the market . it is investing . there is a big difference between risk and something that is just volatile in the short term .

you don't need to sell a thing either . it is always your money , it may change daily but that balance is all yours .

news flash -you purchasing power changes too over time in your cd'sd but it goes from bad to worse .  it is a coin toss as to whether your dollars will buy what they did each year . a very dangerous game to play if retired .

but hey , your choice .... it is not for me to convince anyone , i only educate and present the facts  ..


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## KingsX (Dec 19, 2017)

.

Inflation is just one factor to consider... and will negatively affect spenders. 
The more you spend, the more it might affect you.

I put my first Roth IRA into a mutual fund and lost money.   Never again.

I'll stick to slow and steady CDs.

I retired at age 55 and live a debt-free comfortable independent life... that's plenty of winning to suit me.


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## mathjak107 (Dec 19, 2017)

it would be impossible for your first roth to have lost money  in diversified funds because of markets . it could only be bad investor behavior .

you either bailed out wrongly , speculated in  individual companies or sectors  or you used long term investments for short term money needs .

there is no other way . markets have never lost money for anyone over the long term in this country. if they did the only way was because of poor investor behavior .


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## KingsX (Dec 19, 2017)

mathjak107 said:


> it would be impossible for your first roth to have lost money  in diversified funds because of markets . it could only be bad investor behavior .
> 
> you either bailed out wrongly , speculated in  individual companies or sectors  or you used long term investments for short term money needs .
> 
> there is no other way . markets have never lost money for anyone over the long term in this country. if they did the only way was because of poor investor behavior .




Sure,  blame it on me.  It wasn't me... it was the mutual fund.  

And it was GOD giving me a valuable object lesson so I would never invest in the stock market again. 

Years later I was able to retire early at age 55.  I am blessed.

.


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## mathjak107 (Dec 19, 2017)

really , it is the fund ? there is not a diversified fund that is down over any typical  accumulation stage or even retirement stage that typically spans decades unless it was used for short term speculating or the owner did the wrong thing and bailed out. how  could a long term investment like a diversified mutual still be down ?  every fund is up tremendously   . you had to bail over the short term to lose money .

that is what happens , folks bail out  and exhibit poor investor behavior , then it is the fund or markets fault they did the wrong thing .

tell us what fund it is ?     i will tell you how it did


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## KingsX (Dec 19, 2017)

.

The stock market is a game of chance.

Gamblers think they can win lost money back too... so they keep playing the game.

I don't play games.


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## mathjak107 (Dec 19, 2017)

what fund was it you claim lost your money ?


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## KingsX (Dec 19, 2017)

mathjak107 said:


> what fund was it you claim lost your money ?




It was called Strong Fund. 

https://en.wikipedia.org/wiki/Strong_Capital_Management

I put $2000 into that mutual fund.  It  began to lose money for a prolonged period of time.
I waited... only to lose more money. After losing $500,  I withdrew the remaining $1500.
Although it is mentioned in the link above,  I never received any restitution or even a notice.
It was many years later when I found out the rest of the story.

As I previously posted, it was an object lesson that taught me never again to put my money at risk.

If you have had success and feel comfortable with whatever risk you take to get a higher return...  good for you.

But there are others like me who prefer a sure thing over gambling.


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## mathjak107 (Dec 20, 2017)

so it was not markets . it was  fraud .   fraud happens in all walks of life . markets cycle plain and simple . to date no one ever lost any money because of markets . they couldn't because markets are higher than ever .
 markets have grown huge amounts of money . the portfolio i use which i have followed since 1987 has taken 100k and through all the  ups and downs took 100k and grew it to 2.70 million .

it consists of nothing special fidelity funds . i use the fidelity insight newsletter so even my wife who has no interest can follow what to do .

had one owned nothing but the s&p 500 it would still be over 2 million . never forget  a penny saved is a penny earned but it will always be a penny without compounding . there is a big difference between gambling ,speculating AND INVESTING .


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## OneEyedDiva (Dec 26, 2017)

Being Muslim, CDs are actually not approved investments for us. But before I accepted Islam, I did have them. I remember a long time ago one savings and loan in town had an interest rate of !4%...that is unheard of today! We are not supposed to pay, collect or charge interest. The ruling for collecting has been relaxed a bit to accommodate inevitable business transactions here in the west, so that a very small percent can be earned but should be given to non-Muslim charities. Interest is such a pittance these days that that can be accomplished by tipping a waitress or leaving money in the Dunkin Donuts tip cup. The reason for the ruling about interest (Riba) is because back in the days of Prophet Muhammad (PBUH), poor people were being made poorer (and the rich, richer) because they couldn't pay off their debts due to the high interest. As we know, today people are having the same issues. Much of payments on loans and credit cards go to the interest, not the principal unless payment is made in full. People have lost their homes and cars because of this system. Muslims can invest in stocks, mutual funds, ETFs and financial vehicles that pay capital gains and dividends; eg: we share in the profits and losses. In the scheme of things, when well invested, this usually brings in *way *more income than interest bearing accounts. Ultimately however, people have to do what they feel comfortable with financially.


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## KingsX (Dec 26, 2017)

OneEyedDiva said:


> Being Muslim, CDs are actually not approved investments for us.
> 
> We are not supposed to pay, collect or charge interest.




Interesting.   

Deuteronomy 23:19-20 allows interest collected from foreigners [non-Israelites.]

.


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## OneEyedDiva (Dec 28, 2017)

KingsX said:


> .
> 
> The stock market is a game of chance.
> 
> ...



The stock market is not a game unless someone plays it like it is (eg: one doesn't do his/her due diligence, or tries to time the market, which usually doesn't work in one's favor, or gets in or out too fast). Finding tried and true mutual fund companies that have excellent or very good investment vehicles with a history of good returns and sticking to the investment plan is recommended (many use dollar cost averaging...a certain amount invested each month, or quarter). I've had only a couple of losses. Ironically both were investments highly touted by the "experts" that you see on T.V. and financial articles get written about. I went on to sell at a loss (the mutual fund) but found an even better investment that more than made up for the loss. The other is a stock, which takes up a minuscule portion of my portfolio, that I expect to eventually rebound. Since I invest for the long haul, there's plenty of time for it to do that. I'm a self taught investor who's portfolio has gained double digits most years and I've been investing for 32 years. Even during the big crash in 2008, I sold shares of a fund at a profit. I have my own methods for choosing investments and I've surprised myself at how much risk I can stomach. 

I have a friend who put his investments in the hands of a broker. He never tried to find anything out about what was in his portfolio. He claims to have lost a lot of money during the crash, much more than the average investor. I suspect his broker took him for a ride. So he decided to put more into cash investments (savings, checking, CDs). Although he often asks my opinion about money matters, I didn't even try to talk him out of it because he has to be able to sleep at night. But the fact is that safe investments, which certainly should be held in accounts geared for emergencies or will be needed in 5 years, will not keep pace with inflation so the value of those dollars will be severely eroded over time.


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## retiredtraveler (Dec 28, 2017)

OneEyedDiva said:


> The stock market is not a game unless someone plays it like it is (eg: one doesn't do his/her due diligence, or tries to time the market, which usually doesn't work in one's favor, or gets in or out too fast). Finding tried and true mutual fund companies that have excellent or very good investment vehicles with a history of good returns and sticking to the investment plan is recommended (many use dollar cost averaging...a certain amount invested each month, or quarter)...... I'm a self taught investor who's portfolio has gained double digits most years and I've been investing for 32 years......



Good for you! I started investing about 40+ years ago, all on my own (with the definite help of_ Money, Kiplinger _magazines,_ Wall Street Journal_, library books, brochures handed out from brokerage firms, personal finance articles in various magazines). It wasn't until relatively recently we all had PC's and could instantly find info. 
   I've always had difficulty understanding why people could not see that wealth could be created in the markets, and why they didn't put in the time and effort to find out how this coiuld be accomplished. A great deal of lost opportunities in our boomer generation.
   i do have to state, I spent a lot of my free time reading very dry articles on investing, saving, where to get highest cd rates, best credit cards, and just understanding macroeconomics, market terms, risk vs reward, and dozens of other principles. I assume you had to discipline yourself to do research and read what were probably, fairly boring articles and numbers.


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## mathjak107 (Dec 28, 2017)

retiredtraveler said:


> Good for you! I started investing about 40+ years ago, all on my own (with the definite help of_ Money, Kiplinger _magazines,_ Wall Street Journal_, library books, brochures handed out from brokerage firms, personal finance articles in various magazines). It wasn't until relatively recently we all had PC's and could instantly find info.
> I've always had difficulty understanding why people could not see that wealth could be created in the markets, and why they didn't put in the time and effort to find out how this coiuld be accomplished. A great deal of lost opportunities in our boomer generation.
> i do have to state, I spent a lot of my free time reading very dry articles on investing, saving, where to get highest cd rates, best credit cards, and just understanding macroeconomics, market terms, risk vs reward, and dozens of other principles. I assume you had to discipline yourself to do research and read what were probably, fairly boring articles and numbers.




for more than 30 years i never put more than 30 seconds a week in to investing .

i have been using the fidelity insight newsletter growing money using plain ole fidelity funds . if you had put 100k in their growth model in 1987 today it is 2.70 million . that is through wars , crashes ,recessions and the great recession . we get an e-mail every friday as to any changes and done! 

it is so easy to follow that without me my wife can manage things perfectly .


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## retiredtraveler (Dec 28, 2017)

mathjak107 said:


> for more than 30 years i never put more than 30 seconds a week in to investing .
> 
> I have been using the fidelity insight newsletter growing money using plain ole fidelity funds . if you had put 100k in their growth model in 1987 today it is 2.70 million . that is through wars , crashes ,recessions and the great recession . we get an e-mail every friday as to any changes and done!



Then you started out knowing far more than I did.  I couldn't define a stock or bond, or talk about the upside/downside, or distinguish between a value fund or large cap. I started in the 70's, long before PC's, and had to take a notebook to the library, and spend some money at the copier, to understand the concepts. There is no way I would use your technique -- taking someone else's word for it (newsletter) without a full comprehension of what I was reading. You may have had that --- I had to study for years.   
    Took me a number of years to actually be able to talk to someone else and be able to give them facts and numbers off the top of my head in order to help them (or myself), make a decision on where to invest. We all have our differing techniques. Part of the 'fun' was stock trading, which I didn't do until the mid 80's. Used to go to the library weekly looking at ValueLine. By then, I could understand all the charts and graphs. I'm a nerd --- I have to understand how things work. 
  Anyway, DW and I retired on investments at 56 and 54 respectively, no bene's of any kind. So I did something right.


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## mathjak107 (Dec 28, 2017)

i started out knowing little other than this : 

i grew up in a nyc housing project and i KNEW  going back with my own family was never going to be an option . being poor was not an outcome i would let happen .

so i knew a penny saved is a penny earned but i learned early on it will always be a penny unless my money works for me while i work for my money . kind of a double team .



so like anything that is important to us we learn a bit and we learn who the smart people are who we can learn from .

i discovered a newsletter that makes up portfolio models and you just mimic them .  done!   it is so easy my wife can take over , my kids do it  and nobody needs to know a thing.

people spend so much time researching cars , refrigerators and even travel plans . yet the things that are life altering like their financial growth not only don't they learn a bit but they do not even research to see who does know and can show them


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## KingsX (Dec 28, 2017)

.

I thought this topic was about how CDs remain useful.
That topic has been usurped by those who disagee.

.


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## mathjak107 (Dec 28, 2017)

perhaps except to hold some of the current years spending money they are not useful at all  or have very limited use . especially when rates are rising .

you will generally have those who have no real financial knowledge  or pucker factor proclaiming their benefit as an "investment " , but in my opinion it is more like the emperors new cloths than really something that should be used just to hold some short term money


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## KingsX (Dec 28, 2017)

.


Trolls have killed this topic.


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## mathjak107 (Dec 29, 2017)

i didn't see any trolling kill the topic . i saw  financial education tell the truth about the topic as to the fact they are really not very useful at all  . sorry if you don't want to hear it but i am sure others  got something out of it they may not have realized .

just because a topic has a name like cd's remain useful despite low yields -does not mean they are , nor does disagreeing with facts  make it trolling .

the last 50 years cd's have resulted in a negative real return more often than not causing a loss in purchasing power .  on the other hand a 50/50 mix of diversified funds HAS NEVER LOST  money in any 10 or 20 year time frame when we take the worst time frames we had .  which one was the bigger risk ?

it is important for those running on mis-information or parroting false beliefs , to learn ,so they can have a better informed decision as to why they  want to do or not do do something


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## rkunsaw (Dec 29, 2017)

I haven't seen anything that strayed from the topic. The OP  said CDs are still useful but it seems most posters disagree. It is not trolling to disagree and giving opinions about what someone thinks is a better option is what forums are all about.

The first time I entered the stock market I lost money because I got scared and pulled out. I didn't have much and was afraid I'd lose it all. Since then I have done very well. My account is not well balanced because I have much more in stocks than in mutual funds but by studying the market and following politics it has worked well for me.


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## Aunt Bea (Dec 29, 2017)

rkunsaw said:


> I haven't seen anything that strayed from the topic. The OP  said CDs are still useful but it seems most posters disagree. It is not trolling to disagree and giving opinions about what someone thinks is a better option is what forums are all about.
> *
> The first time I entered the stock market I lost money because I got scared and pulled out.* I didn't have much and was afraid I'd lose it all. Since then I have done very well. My account is not well balanced because I have much more in stocks than in mutual funds but by studying the market and following politics it has worked well for me.



I lost money in my first attempts too because I was trying to be a get rich quick player and not an investor.  

Once I gained a little knowledge, experience and maturity I started making better choices that gave me steady gains over time. 

I still like to keep a fair amount of cash on hand. I'm not really concerned about how much it costs me in lost opportunities or if it makes sense it just makes me feel better, LOL!!!

We each need to find a way to manage our finances that feels right for our own situation and hopefully carries us comfortably to the grave.


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## mathjak107 (Dec 29, 2017)

key words though are "informed  decision "   carries us comfortably to the grave.
to many hurt themselves by believing myth and mis-information from other mis-informed people and  they hurt themselves . so many hear you can draw 4% and have the money last forever , but that is not true of fixed income , which has failed way to many times already to make sense .

so the more "correct info" you have ,the better informed the decision can be that you have to make .

to me it makes little sense to work so hard to accumulate a sizable  retirement savings , but then use only fixed income and in order to maintain a high success rate be very limited to what i can take as a pay check .

so each asset class , including cash instruments have a roll to play that they do best , but taken away from that roll they become much to risky ,only few realize it .


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## retiredtraveler (Dec 29, 2017)

> Trolls have killed this topic.



The topic ran it's course. A percentage of people believe CDS's are useful. Some of us don't believe a CD is an 'investment' at all (it's a savings vehicle) and think they're 'worthless' bercause their return is below that of inflation. There are 'true' investments that can yield returns, with _little _risk (not zero risk), to help ensure you have a steady income for your lifetime.
   So, no, CD's are not 'useful' in a general, personal-financial sense as inflation causes them to have a negative return. Only slightly better than money under the mattress.


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## mathjak107 (Dec 29, 2017)

i have learned  through experience.as soon as i hear  a retiree go stocks are like gambling i know they likely have taken the riskiest path they could in retirement  without even knowing it .


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## Bullie76 (Dec 29, 2017)

They are useful from a stability standpoint. People who cannot sleep with a lot of volatility. And there are plenty in this boat. Is it useful to have everything in cd's? Probably not. But for those that want stability and that have 'won the game' so to speak, I see nothing wrong with cd's. It doesn't mean they are uneducated.


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## mathjak107 (Dec 29, 2017)

it means they are making a mental choice not a financial choice, just because they are making a choice that is the riskiest for losing value . rich or poor the effect will be the same so winning the game has nothing to do with it . even if i  won the game i don't want to lose value ..

it is always the mental choices that have us not do the best things financially . so making a poor choice because mentally it lets you sleep at night does not mean it is the better choice  and a choice that shouldn't be taken to task so others may rethink their plan  with this new realization .. .


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## Bullie76 (Dec 29, 2017)

If ringing up the highest number possible is the best choice for you and you have the appetite for volatility, by all means go for it. But I'm not going to tell people they are uneducated and making a poor choice for wanting some stability.


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## mathjak107 (Dec 29, 2017)

wrong! 
 ringing up the highest numbers is not what it is about . in fact it is about basing things on the worst possible outcomes .

developing a safe ,secure ,consistent income that can stand up to a 4% inflation adjusted draw with the highest success rate we can get is what it is all about . anything less than a  4% draw  capability ,whether you need it or not is inefficient use of your money .

you cannot do that with cd's or fixed income alone . no one is saying you put all your money in equities . but 40-60% has proven to offer the highest rate of success with the lowest risk . volatility and risk are not the same thing at all.

out of the 117 rolling 30 year periods we had so far  , at a 4% inflation adjusted draw a 50/50 mix survived 96.50% of them without ever having to take a pay cut .

fixed income survived only 45% of those 117 time frames .

it is very very risky and almost a coin toss that using fixed income will have you having to take a pay cut . would you want a 25% pay cut while working ?  the difference between 3 and 4% is a 25% pay cut .

i rather have  a 96.50% success rate if i had to bet on my income  than a 45% one .


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## mathjak107 (Dec 29, 2017)

keep in mind , if you retired in 1965/1966 , you retired in to the worst time frame ever to retire . it was worse than had you retired in 1929 .

it wasn't markets or rates that did retirees in . it was  the 2.50% inflation they had doubling in 3 years and tripling in the years to come that got them . spending so much down up front had even the greatest bull market in history unable to save them . it is not returns when spending down that you have to worry about .

it is excessive spending when real returns were negative that did them in . the sequence of your returns ,rates and inflation coming in can make a 15 year difference in how long the money last between the best and worst outcomes ..,


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## Bullie76 (Dec 29, 2017)

Earlier you posted about increasing your portfolio this year by several hundred thousands. If that is not bragging about ringing up your numbers I don't know what is!  This thread is about how CD's remain useful despite low yields. And my contention from a stability stand point that is correct. No where have I said put 100% in cd's. You can throw out all the statistics you want about how one AA is better than another, but no one size fits all. My parents were strictly cd investors as I'm sure many here. They survived nicely and amassed a nice size nest egg. Would I advocate their approach today? No.... but people can live nicely on different approaches. 

I know you think you have all the answers but you don't.


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## mathjak107 (Dec 29, 2017)

they are just a holding place for money waiting to be spent or invested . so i can't say they are useful for anything but that  .  

if someone chooses to throw a big portion of savings in them , i have no issue with that . but i can certainly disagree that they are useful for much , especially as an investment for generating a long term income that is above a 2% draw or so . which is really inefficient use of the money , since 40% equities  would allow 4% with almost no risk over the long term .

 so  i certainly gave my reasons why it is not a good idea whether anyone does it or not . . i don't have to agree with the premise and in fact i don't . cd's are a better place to store this short term money than a money market when rates are falling . but they would be the last place i would use when rates are rising .


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## KingsX (Feb 5, 2018)

.

Plenty of losses at the NYC casino today.

Earlier today the DOW was down around 1,600 points... largest intra-day loss in history.

At the closing bell, the DOW was down 1,175 points.


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## mathjak107 (Feb 5, 2018)

a 10% drop so far  but a spectacular 300 - 400%  run up since 2008 . certainly well worth investing in . markets never grow to the sky . 

it is likely just a bump in the road .

the markets have been sooooo non volatile for a year that the trading machines were leveraging higher and higher buying stock with borrowed money .

when volatility is low the firm can borrow and buy more on margin because the loss potential in dollars is low.

but when volatility picks up they have to unload and sell or risk margin calls and losses bigger than they want . so all these computerized programs move together and selling leads to more selling .

the economy world wide is growing , unemployment is low , rates are still historically low and we have 81% of companies earnings being beat . throw in the tax cuts and this will hopefully be a flash in the pan because nothing changed . i bought today .


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## KingsX (Feb 5, 2018)

mathjak107 said:


> a 10% drop so far  but a spectacular 300 - 400%  run up since 2008 . certainly well worth investing in . markets never grow to the sky .




Unless one is a new gambler who arrived at the casino late in the game.

CNBC today said there were lots of new investors who waded into the stock market beginning in January.

.


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## KingsX (Feb 5, 2018)

mathjak107 said:


> when volatility is low the firm can borrow and buy more on margin because the loss potential in dollars is low.
> 
> but when volatility picks up they have to unload and sell or risk margin calls and losses bigger than they want . so all these computerized programs move together and selling leads to more selling .
> 
> the economy world wide is growing , unemployment is low , rates are still historically low and we have 81% of companies earnings being beat . throw in the tax cuts and this will hopefully be a flash in the pan because nothing changed . i bought today .




Both CNBC and FOX Business news referred to investors who bought and lost on margin who now may have to pay the piper.

.


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## mathjak107 (Feb 5, 2018)

the issue wasn't so much the individual investors . it is the pro's who borrow  to trade o margin . the market was so passive for more than a year . it had little volatility so they just allow more and more leverage . but once volatility picks up they need to sell and reduce . this to shall pass


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## KingsX (Feb 5, 2018)

.

One thing that confused me...  both CNBC and FOX Business news said the fear was inflation and the Fed raising interest rates.
Someone on CNBC said the Fed should  cut back on raising interest rates this year. But the way I understand it,  the reason the
Fed raises interest rates is to keep inflation from getting out of control. So if there is inflation... the Fed will raise rates.


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## mathjak107 (Feb 5, 2018)

there is no science to it .  the last 40 years every time the fed raised interest rates more than 1% in the  year , the bond markets like that because it reigns in inflation . bonds actually went up and did well every time but 1994 .

but without markets generating billions in profits for investors , spending falls off . i know until we bounce back we are not buying the co-op we were going to buy .

so without the markets doing well inflation is less of a threat .


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## KingsX (Feb 5, 2018)

mathjak107 said:


> there is no science to it .  the last 40 years every time the fed raised interest rates more than 1% in the  year , the bond markets like that because it reigns in inflation . bonds actually went up and did well every time but 1994 .
> 
> but without markets generating billions in profits for investors , spending falls off . i know until we bounce back we are not buying the co-op we were going to buy .
> 
> so without the markets doing well inflation is less of a threat .




Discussion on the business news channels say that inflation fear has spooked the stock market...  inflation caused by a good economy,  business growth, tight labor market and higher wages.  

Yet at the same time, they do NOT want the Fed to continue to raise rates [raising rates is what the Fed does to fight inflation.]

That is what confuses me.


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## Aunt Bea (Feb 5, 2018)

I think part of the volatility is due to the swearing in of the new Federal Reserve Chairman Jerome H. Powell and some of the comments made by Janet Yellen as she leaves her post.


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## KingsX (Feb 5, 2018)

.

The stock market was way overpriced and has been for quite awhile.  Even the experts have said it has long been due for a correction.

Gamblers also have winning streaks but winning doesn't last forever.


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## mathjak107 (Feb 5, 2018)

the bull was going on because so many were so pessimistic  , but once the tax cuts were signed there was to much euphoria . i cut from 50 to 40% equities  out of comfort . i now am starting to beef up the allocation again


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## KingsX (Feb 5, 2018)

.

I prefer CDs... moving along slowly but surely like Aesop's tortoise.

My aim is NOT to get rich quickly...  but to live comfortably.

I don't mind the stock market hares running fast ahead of me.

Sometimes I pass those same hares after they have fallen and hurt themselves.


_The race is not always to the swift._

http://read.gov/aesop/025.html


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## mathjak107 (Feb 5, 2018)

never forget , all these falls are down to  levels that  are still way a head of where cd's  would leave you , and are still  capable of producing far more income even after the dip . most retirees without pensions are not wealthy enough not to have their  money  work for them .


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## Ruth n Jersey (Feb 5, 2018)

I have CDs and would never put my savings in anything risky. The only change I have made is the term. A few years back I had no problem investing it in 5 or even 10 years but now because of my age I have shortened the term. I lose a bit more than having it in a longer term but I sleep at night.


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## KingsX (Feb 5, 2018)

Ruth n Jersey said:


> I have CDs and would never put my savings in anything risky. The only change I have made is the term. A few years back I had no problem investing it in 5 or even 10 years but now because of my age I have shortened the term. I lose a bit more than having it in a longer term but I sleep at night.




Currently,  a lot of banks have good short term special CD rates... so shop around.

Same with US treasuries... the 30 year treasury rate is not much more than the  2, 5 and 10 year treasury rates.

When short term treasuries have a higher rate than long term,  it's called an "Inverted Yield Curve" and might be a precursor to a recession.


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## retiredtraveler (Feb 5, 2018)

KingsX said:


> . I prefer CDs... moving along slowly but surely like Aesop's tortoise. My aim is NOT to get rich quickly...  but to live comfortably.



And after the historic drop today in the market, those CD's are looking even better!


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## mathjak107 (Feb 6, 2018)

_after the drop today the stock markets could loose another 50% and still be a  head of "investing in cd's  from this bull market alone so it just is a silly comparison.
 the guaranteed loss will be  cd's  from inflation and taxes on them.

cd's are not supposed to be instead of investing , they are used with investing although many who are gun shy do it . it may be fine for them but others who need larger draws would be taking the biggest risk in retirement there is which is  trying to draw anywhere near 4% with just fixed income .

so nothing wrong with fixed income but you have to take a big cut in pay from what your assets could produce  and to me drawing so much less is really not an efficient use of my money when with little long term risk a 40% equity position could grow so much more over time and allow me to enjoy more of what i worked for . _


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## rkunsaw (Feb 6, 2018)

Some people don't seem to understand that the price of a stock only matters when you are buying or selling. Right now is the perfect time to buy if you have available funds.

If you have a stock that pays good dividends hold on to it and don't worry if the price goes down.


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## mathjak107 (Feb 6, 2018)

rkunsaw said:


> Some people don't seem to understand that the price of a stock only matters when you are buying or selling. Right now is the perfect time to buy if you have available funds.
> 
> If you have a stock that pays good dividends hold on to it and don't worry if the price goes down.



you certainly better worry if it goes down . getting a 4% dividend is actually spending 4% in principal as an example . it is no different than selling equal dollars in a non dividend portfolio .

all that counts in either case is your total return .   remember a draw rate is based on TOTAL PORTFOLIO VALUE . with every dollar of dividend your money left compounding is adjusted downward by the same amount , dividends are not like interest .

how the spending money is made up is irrelevant . it can be all dividend ,all appreciation or a combo . you need the same total return in all cases to sustain the payout .

if you think about the hypothetical case of a stock staying flat and not overcoming the payout , in theory you would have all your shares but they would be approaching zero worth eventually .

so nooooo , you can never ignore the share price just because you are getting a payout  anymore than you can ignore your portfolio value being up or down drawing the same payout .


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## rkunsaw (Feb 6, 2018)

Mathjak I think we are talking about different things. In my case I'm not drawing funds from my account, I'm adding to them. My dividends are reinvested as I get them. Therefore I'm 

actually better off if the price is down when the dividends are reinvested so I get more shares. 

If and when I decide to sell the stock I will, of course, look for a higher price. But as long as I'm holding and collecting dividends the price doesn't really matter.

If I was drawing funds from my account to supplement my income that would be another thing.


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## mathjak107 (Feb 6, 2018)

actually another myth -reinvesting those dividends when markets are down adds no value because the adjustment and reinvestment are basically a wash at the same price . 

if you have 100k in a stock and get a 5% dividend you have 5k in hand and 95k left compounding . the stock is knocked down automatically by exchange computers before the ring of the bell by 5% so 95k will be acted on by the markets  .  so if you reinvest you have the same  100k bought at the same price or pretty close as you had. in the end you have the same amount you did the night before if you reinvest with the same profit. now you have more shares at lower price making up the same value .

rebalancing adds more  value in dollars  not dividends . rebalancing is adding more money and buying more shares at a cheaper price . reinvesting does not add a thing you did not already have the night before


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## KingsX (Feb 6, 2018)

.

I'm not the only one comparing the stock market to a "casino."


*ICAHN SAYS, REGARDING MARKETS, 'THIS CASINO IS ON STEROIDS' -CNBC*

https://www.cnbc.com/2018/02/06/reu...-markets-this-casino-is-on-steroids-cnbc.html


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## mathjak107 (Feb 6, 2018)

opinions on the markets are all over the map . in fact some have been bearish since 2008 . in the mean time it has grown  great amounts of money over every single  rolling 30 year retirement or accumulation period . all 117 rolling periods  are within  2% average returns with each other . despite wars , crashes , depressions , recessions and yes even opinions .


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## KingsX (Feb 6, 2018)

mathjak107 said:


> opinions on the markets are all over the map . in fact some have been bearish since 2008 . in the mean time it has grown  great amounts of money over every single  rolling 30 year retirement or accumulation period . all 117 rolling periods  are within  2% average returns with each other . despite wars , crashes , depressions , recessions and yes even opinions .




Nothing human lasts forever.

.


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## retiredtraveler (Feb 6, 2018)

This headline says it all.

[h=1]Dow soars 600 points, hitting new high of the day after crazy swings[/h]


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## mathjak107 (Feb 6, 2018)

KingsX said:


> Nothing human lasts forever.
> 
> .




markets are higher highs and higher lows so eventually over time  even the crashes are higher than the peaks  earlier .  nothing last forever but 117  30 year cycles since 1871 says it can go on a long long time and that includes the worst of times ,


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## KingsX (Feb 6, 2018)

retiredtraveler said:


> This headline says it all.
> 
> [h=1]Dow soars 600 points, hitting new high of the day after crazy swings[/h]




The question is... is this a sucker's rally [also known as a "dead cat bounce"]
or the beginning of another long winning streak ??


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## KingsX (Feb 6, 2018)

mathjak107 said:


> markets are higher highs and higher lows so eventually over time  even the crashes are higher than the peaks  earlier .  nothing last forever but 117  30 year cycles since 1871 says it can go on a long long time and that includes the worst of times ,




Like a casino...  the timing of cashing out is everything.

Seniors often require more immediate access to their money which might cause them to have to cash out in a down market.


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## mathjak107 (Feb 6, 2018)

it could be , but even if we fall , it is to levels i still would never have achieved if all i believed in was  cd's . as long as we are doing what if's those retirees in 1966 were devastated by surprise inflation decimating everything including their bonds and cd's which were always behind the curve .


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## KingsX (Feb 6, 2018)

mathjak107 said:


> it could be , but even if we fall , it is to levels i still would never have achieved if all i believed in was  cd's . as long as we are doing what if's those retirees in 1966 were devastated by surprise inflation decimating everything including their bonds and cd's which were always behind the curve .




I remember my first CD  paid over 9 percent interest [if only I could get that rate now !]

While that CD rate was lower than inflation at the time... inflation is not as financially damaging to those like me who live a frugal debt-free lifestyle.

.


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## mathjak107 (Feb 6, 2018)

well that was back then , and that is you  . for many seniors they will be crushed by healthcare ,   and long term care costs if they inflate . rents and real estate taxes can sky rocket too . and cost of living adjustments have little to do with personal cost of living .


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## KingsX (Feb 6, 2018)

mathjak107 said:


> well that was back then , and that is you




Yes... that is me... I handle my personal finances to suit my personal circumstances.
CDs [the subject of this topic] are my personal choice and I am happy with the results.


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