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Thread: CDs or Mutual Funds currently?

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    Default CDs or Mutual Funds currently?

    Is it better to put money into CDs or mutual funds at this time? If I don't plan on touching this money for a while and I have more than 10k saved, where is it better to put it? I also don't know which CDs and funds are better than others.

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    Default Re: CDs or Mutual Funds currently?

    something tells me mel is going to say CD's... they have a better return rate right now than many of the mutuals, plus they are guaranteed, and you can choose from short or long-term. of course, it also depends on how much you are planning on putting in. 10,000.... there are some AWEsome cd's for that. mel can better direct you. 2000... maybe a beginning 9mnth or 1 yr cd, or a roth ira mutual fund.

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    Default Re: CDs or Mutual Funds currently?

    When I am advising clients i ask them if they are familiar with mutal funds first.

    If you do not have experience with mutal funds I would advise going with CDs. The market right now is volatile. You can loose with mutal funds just like stocks.

    With CDs you cant loose money. I would shop around for CD specials. Call local banks and credit unions. Ask about any fees for early withdrawal. Is the fee based on what you take out or the whole amount of the cd? Just in case you have to tap into it.

    If you have a large dollar amount and do not have an emergency fund, i would also suggest breaking the amount up. Some in CDs and some in a high yield money market account. High yield money market accounts have a higher interest rate than normal savings accounts but not as high as CDs usually. A portion of the high yield account you can withdraw from if you need to without penalty.

    You will decrease the chance of being forced to break your CD if you have an emergency fund.

    While your CDs are maturing take the time to learn more about mutal funds. When you feel comfortable then take a portion of your CD money and put it into mutal funds. It is always best to educate yourself to make informed decisions instead of trusting someone else's judgements.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: CDs or Mutual Funds currently?

    right now the interest rates available on even 3 month CD's is quite high. Plus there is zero chance of taking a loss on principal.

    right now the US economy thus stock market thus mutual funds composed of stock shares is arguably topping out. While it is distinctly possible to still make money in a declining market by careful selection of mutual funds, this is not a 'task' for an amateur investor. And unlike CD's, mutual funds do carry a risk of loss on principal. Because of these factors, IMHO the current risks associated with mutual funds do not justify the probable rewards at the moment.

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    Default Re: CDs or Mutual Funds currently?

    I prefer mutual funds. There is so much more potential earnings, although of course you have to be willing to take some risk. The key is that you don't need the money right away so if the market goes down you can simply wait until it comes back up. Although you really need to define, not needing the money now. For me that means not eneding it in the next 3 years or more.

    There are some very good lifestyle funds out there now that can diversify for you. You certainly don't want to tie up all your money into a certain sector or a limited type of fund. Lifestyle funds eliminate that by providing a diversified set of holdings. American Century is one (there are many, that's just one I'm familiar with) that has 10 different lifestyle funds ranging from very conservative to very aggressive. The annual returns range from 8.4% (very conservative) to 14% (2045 portfolio). Compare that to CD rates in the 4.5% to 4.75% range. You'd get twice the return on their most conservative fund.

    It really depends on what kind of person you are. If you're very conservative with your money and would totally freak out with an dip in the stock market AND you'd prefer to never lose your money versus taking a chance on earning more, then go with a CD. Or better yet Capital One has a great money market rate which will beat most CDs plus not tie up your money. If you can handle a little risk and are willing to try for more money go with a lifestyle mutual fund.

    http://www.americancentury.com

    http://www.capitalone.com/

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