Guts

n00b question:





What's the advantage of a CD vs. a "high yield" savings account that pays a similar rate?





For example, if both a CD and a HYSA pay 5.5%, is there something about the way a CD compounds or what not that still makes it the superior investment if you're willing to tie up your money?
 
<p>Hey, I just did a quick Google on it. </p>

<p class="body"><em>High rates can sometimes mean that a financial institution is struggling to bring in deposits, so you want to consider the bank's </em><a target="_blank" href="http://www.bankrate.com/brm/safesound/ss_home.asp"><em>Safe & Sound rating</em></a><em>, too. An FDIC- or NCUSIF-insured deposit is backed by the full faith and credit of the United States government, but if the interest rate is the same, you should go with the higher rated bank. Bricks and mortar don't make a bank safer; it's how the bank is managed. That's why the Safe & Sound ratings are important.</em></p>

<p class="body">Don't know what this "safe & sound" thing is.... FWIW.</p>
 
jwb- a HYSA is liquid, usually 2-3 days to withdraw money. A CD is for a fixed term, and getting your money out in times of need can be very costly.
 
if you can muster up 15m more talk to your broker about 7 day rolling paper. currently yielding 5.8%. Keep it with good names and only AAA. Costs you nothing as all the costs are picked up by the issuer. I use it alot for my institutional clients for parking money. Resets and is free and clear every 7 days. Howerver it will fall if short rates fall back but you will usually beat money markets by 10-20 bps
 
7 day auction paper and 7 day preffered is a short term finance tool for many corps and funds. The paper is usually rated MIG1 or AAA and rolls at weekly auctions. The paper can also be municipal short paper and can be double tax free. Most individuals do not use this stuff because we brokers really don't make any money placing it. I funded 10 million the other day and got paid $20. I did it as a client service. Paper trades in 25M lots and is considered very safe and liquid. Put it to you this way, my family buys this stuff instead of CDs. You can spread it out but be chosey about the issuer. It leads money market but adjusts weekly to prevailing market rates. Incredibly when everyone was running from the credit markets this stuff spiked for a week or two to around 6%. Always trades at par because of the dutch auction process used to price it each week.
 
For you I would do this for free. I do love this blog. You would have to set up an account and I'm not sure I want to post my office number here. What do you suggest. If nothing more I can email you some generic stuff to see if it is your cup of tea
 
<p>Eff,</p>

<p>When did you move?</p>

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