CD's

[Jake7]

Good ol' certificate of deposits.

There's so many CD strategies, and I'd love some input as to what you guys do. I've heard some guys start out with $1,000, and just add $1,000 to it every year out of their own money, and just let the interest build up over time - does that sound very effective?

Also, I've heard of the "CD Ladder" strategy - which is where you start out with 1,2,3, and 4 year CD's, and keep rotating the money, so that it's always accessible to you in case of an emergency.

Anyone have success with CD's, or bad experiences with them? The security of them really entices me, but not if the turnaround isn't going to be worth putting the money away. Over a period of 10-20 years, could CD's pull any real returns?

[cap1]

Well there quite a few different types of CDs. I'm a fan of liquid CDs just in case I get in a bind I can withdraw some cash fast.

[tiretrx]

I use the ladder approach. I think return performance is subjective. When compared to real estate and the market at certain junctures in recent history their returns have been comforting, while certainly not overwhelming. I think they fill an important role in diversification, but not the end all. Right now I have them at about 10% of net worth.

[havasu]

I agree the ladder approach is the best way to control CD's, but you have to keep on top of them.

I once had a 10 day notice to come in for the bank's special rate, but was on vacation and didn't get the notice until 13 days later. When I returned, they had slid the money into a really long term, low interest bearing account, and refused to work with me. I had to bring in my attorney with the threat of a lawsuit for them to release the money back.

Fortunately, the government shut down that specific bank. I couldn't be happier!

[tiretrx]

True enough. That's why I love internet access to my accounts. You can check status on a daily basis.

[JDFANATIC]

I do a lot of investing (not as a professional) for a number of charitable organizations and have done quite nicely with CDs. The thinking with those kinds of funds is that I would rather explain to the BOD that we only earned xxx percentage instead of losing nnn principal. This was the case during the last 5 years when laddering CDs has returned ~5% with no losses to principal when we know what happened to stock market investments. Timing is everything. When the stock market is humming and money is going that direction this is the time to funnel funds into safer CDs which have to increase rates to compete. Right now CDs aren't paying much, even long term (5 yrs etc). We don't know what kind of risk or what kind of returns you are expecting so it is hard to answer what investment vehicle is best for you. For example, I watch interest rates daily. Currently I have personal investments in REITs (check out CIM where I'm earning pretty close to 16% in dividends).

Depending on how much you have to invest, brokerage CDs often pay more than the street price and may be an area for you to explore.

From the tone of your post you probably should seek out professional investment advice. Ask your friends, family to steer you to someone they've worked with and trust. It doesn't have to cost you much, but there are a lot of investment pitfalls out there you want to avoid.