I've finally got interested enough to want to learn more about making
my money work for me. At present I have a premier checking account,
which gives me free online banking and bill pay, and some amount of
interest (I'm not sure exactly how much), as long as I have a minimum
balance, and a premier checking account that gives me a princely
interest of 1.0% for the amount I have.
I've been looking at getting a better interest rate on my money. I've
seen some banks offering "money-market accounts" with a 2.1% rate of
interest. And CDs will give me a higher rate of interest the longer my
period in fixed deposit is.
But I have questions.
a) How is a money market different from a Savings account. I've got
answers like - Money Market accounts give you a higher rate of
interest than a savings, and I can issue x number of checks with a MM
account and I can't with a Savings. Yeah, I know that. But what is it
that allows a MM account to have a higher rate of interest? Are they
putting my money in stocks and funds, that will affect my principle?
("Oops we invested your money, and now it's not worth the money it's
printed on") How do the banks compute the interest rate on the MM? I
remember my bank telling me that the interest rate fluctuated with the
maret, while the savings interest rates didn't. Huh?
b) Coming to CDs, what happens if I have to break a CD before
maturation date? Am I even allowed to do so?
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Real Estate at this point is out of teh question. How do bonds work?
depends on the type of bond you want..but basically most are IOU's. You give them some money, and they promise to pay you in interest. Corporate bonds are usually rate by AAA, AA, A, BBB, BB,etc. I think bonds in the BB (or lower) ratings are considered junk, but you get a higher return on your money (as well as risk). Municiple bonds, usually pay for local construction projects and are federally tax free. U.S Securities are probably the safest (the U.S. has never defaulted on its debt..yet), and still offer a semi-decent return (compared to a MMA or CD's right now). I-Bonds...are probably the coolest things to come out of the U.S. treasuary in a long time. currently the rate is 2.19% but in times of rising inflation (which will probably start happening by next yr), the interest rate rising in accordance with the CPI-U. rates are changed on the first of May and Nov. EE bonds. pay more (2.61%) right now, (I think the rate is base on 80% of the 5-yr notes) but I feel safer with I-bonds personally. the good thing about US saving bonds: you don't pay state/local income tax on them tax on interest doesn't have to be paid till its cashed in you can go to almost any bank to get them cashed they are super-duper safe (even if you lose them, just send in the serial #'s and they'll print you out some more) the bad things: you need to hold the bonds for atleast a year before cashing them you get a 3 month penalty for cashing them before 5 yrs (but even then, they still beat out most MMA and CDs held for the same period) basically if you may need the money within a year, go with a 6-month CD or a MMA, if you can hold out longer U.S. Bonds are the way to go for right now (IMHO).
first thing to recognize is that rule of 72 thnigie.
you can do the arithmetic by hand to prove it (choose a large interest
rate so there isn;t too myuch to do).
72 divided by interst rate == number of years to DOUBLE teh
original amount, IFF you *compound* (reinvest the dividends).
12 % 72/12= 6 years for 5000 ==> 10,000 or, $25 ==> $50
4 % 72/4= 18 years for 5000 ==> 10,000 or $150 ==> $300
real estate, per se, may be out of reach but a stock called
a real estate investment trust (reit) pays upwards of 6%->11%
rigth now. tehre are a bunch out there.
get a scottrade or etrade account and stuff some bucks in there.
LET TEH MONEY RIDE!
use the 'drip' mechanism (D ivident R e I nvestment P ractice)
to add to the account. look at your symbols (positions) on
finance.yahoo.com every couple of weeks .. ro every day if you
are really tweakie about it.
here is one of my winners:
finance.yahoo.com/q/ta?s=CLI&t=5y&l=on&z=m&q=l&p=m20,e50,m100,e200&a=&c=
with the 4 analysis curves i watch, red, green black gold.
this one is a tad tweakie byut for 6.4 % div idon't have to grit
my teeth too much.
one of my losers is:
finance.yahoo.com/q/ta?s=PPS&t=5y&l=on&z=m&q=l&p=m20,e50,m100,e200&a=&c=
<<note: both of these are 5-year curves .... select teh 3 mos or 6 mos
'range' for a better vision of the curves.>>
i got ouot of pps about even (down a couple hundred) after recognizing
teh dividends profit.
or yuo can stay in a cd (cant take it out withought *horrid* penalty)
at 2% 72/2= 36 years for $125 ==> $250 ... teh year 2039!
if 'pure' stocks are un-interesting, locate a 'preferred issue' which
has better security at a slightly lower return.
btw, my implementatino of 'drip' si to take the cash dividends and
find another company .... spread teh risk (buzz phrase = asset allocation).
if nothing else ever penetrated my thick skull as a kid, the following
finally did ... 'your money works harder fro yo than you can
possibly work for yoruself.'
stay teh course ... and remember teh daytraders motto: 'if ya wanna
make a million dollars in 6 months ... start with 2 million.'
good luck - you are young, you can take some chances. you *have* to stay
ahead of the inflation curve! (inflation is the cruelest tax ever conceived)
oh, why do i like reits? well, they are *required to distribute* ~90% of
their income to stock holders. what is bad about that? well, teh dividends
are not protected by the bush tax cuts. oh, well.
unles you are in the 30+% bracket ... SO WHAT!
I don't think Money Market accounts are invested in stocks. Last I heard, they were invested in short-term commercial loans. Thus, they can pay higher interest because the loans earn higher interest. The money market is a good place for 'rainy day' funds, the six months' of expenses that should be kept liquid. Stocks and bonds, and mutual funds for folks who don't want to invest in specific companies directly, are better for longer term investments.
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Just about every bank offers a no-fee checking account now, really. If you're paying a monthly fee for a checking account, take your business elsewhere. I'm not a financial expert, and for that reason most of my long-term retirement savings are in index funds. Most of the fancy, expensive, actively-managed funds are unable to beat the market for any prolonged period of time anyway.
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The minimum at my bank is $1000. I'm fine with that. I just think of it as $1000 dollars that is saved, period. I realise I may be losing some interest on it. I looked at the Credit Union. The Super Money Market has an interest rate of 2%, which is good. What are the cons of a money market account?
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what are you smoking jamie? I know two just off hand that don't require a minimum: 53rd Bank and BankOne
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Re #8: My TCF "Totally Free Checking" account has no fee and no minimum balance. I've had no-fee checking with no minimum balance from National City for about two years now, but I got tired of their limited hours. So no, it's not something that just appeared "in the last six months."
Don't you use National City's Online Banking? I support that application.
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Re #14: It wasn't much help when I needed a cashier's check. ;>
16: It's nice if you don't have to support it. However since we upgraded teh messaging infrastructure in September, it's been much smoother sailing. In terms of functionality, National City seems to be a little behind the times. We just implemented Check Imaging a couple of weeks ago, a feature Huntington's had for over a year now. (I bank with Huntington, I know, blasphemous!). The Self Select Id, where you can chose your own login id instead of using your SSN goes in January. Huntington's had that since early 2001. 17. I'll suggest making cashier's checks available online ;)
It is so interesting to see TS expound on how he invests his stolen money.
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I think that's what the smiley was for. :>
A winky smiley no less. Means I'm joking. But Jamie knew that, right? What about Metlife vs a Credit Union. Is that a good move?
re #19 ... russ might be in love with me but i reject his advances.
Well, that is a word picture I didnt need.
dali-esque in a trailerpark sort of way.
rus may dali -- i prefer to esque-cape craven clutches
TS couldn't be more false, but what else is new?
Well, there goes another item. Thanks. )-:
*HUGGLES*
rule of 72 is still mandatory learning. without understnading *dooubling* of your dollars (not worth or value) you are destined to penury. /.
this itme is alive adn compounding!!!
whatever, wino.
geee #26 has some cute puns .....
whore.
You have several choices: