Investment Ladder Strategy with CDs T-Bills and MYGAs
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- Опубликовано: 21 июл 2024
- Channel page for all my content: bit.ly/BizWithBrian
Investment Ladder strategy: CDs, T-Bills and MYGAs - in this video I explore what an investment ladder is, like a CD ladder, and provide examples for why a person may want one when rates are going up, and also when rates are about to go down. Owning fixed income assets like certificate of deposits, treasuries, and multi-year guaranteed annuities are great investments right now, and if you combine them to create an investment ladder they can work even harder. I complete the video by providing a step by step tutorial on purchasing a CD ladder from Fidelity.
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00:00 - Intro
00:19 - Defining Investment Ladder
01:49 - Illustrating the Ladder
03:11 - Rate Comparison
05:25 - Researching CD Rates
05:53 - Examples for Investment Ladders
08:23 - Buying CD Ladder on Fidelity
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Thanks again Brian for all of the great info.
My pleasure. Thanks for watching
Excellent info!
Thanks!
You are very welcome. Thanks so much for the comment
I subscribed. I learned something I had interest in with visuals.
That's fantastic! Thanks for joining. Brian
Hi Brian… I use Fidelity and didn’t realize that ladder option was in there. (Never bought a CD through them… equities only.) With SPAXX as a core fund paying so much right now, is there any advantage to a CD ladder other than locking in rates for 3-12 months in the event rates plummet? Love your videos!
Great video thank you… i just learned about SFP… sinking financial protection..what REALLY is this?
Thanks. What would be the advantage of mega given high treasury and cd rates? Thanks.
Laddering fixed income is a great idea, regardless of the amount of $ you've got in it.
I rolled my lump sum pension into a IRA in December. Allotted 10% to high dividend BDC's. Other 90% going into fixed income. I am in Fidelity.
Over past month have bought 13 CD's, with goal of a 15 month ladder. From 3 month-15 months, at 10k each, but a couple in same month as rates were to good to only have one. Last month picked up a monthly paying CD @5.30% and maturity payer @5.40%. First 2 were 3 month CD's @5.05% monthly payer, and 5.10% maturity, but just 5k each. Will also park some in 2,3,4,5 years if can land higher yields close to 5%. Best 4 year now is 4.50% monthly, which my idle cash in the brokerage MM fund is paying per month.
With the ladder I am setting up, will have at least 1 CD a month maturing. For now adding daily interest to my IRA for retirement funds, and since 62 now, no need touch until RMD's @ 73 years old. Same for 401k in all dividend paying stocks. Unfortunately had to retire early due to health and thank goodness awarded pernament disability with Medicare at 62. Receive FRA pay now instead of 67 my normal retirement age for FRA. Big savior too, is Medicare saving me over $700 a month health insurance. But, rather still be healthy and working to increase pension and 401k.
Time to take advantage of rising rates. Ladders are good options to pick up higher rates if rates continue climbing.
Wow....you are the poster-child for investment ladders. Well done!
@@BusinessWithBrian yeah a little overdone. Now think about it more, just better to take the 1 year monthly payer at 5.30% and lump sum cash instead on one or two a month. Oh well too late now. Starting in June one a month maturing.
@@wa210 It's nice to have assets maturing every month. You can then invest again (possibly at a higher rate), or put some money in another vehicle - such as equities --- if the market ever shows consistent signs of diminished volatility. Believe me - I have a rather large position of CDs, corporate bonds, agency bonds and treasuries maturing throughout the next several years.
@@mr.j2776 Yeah, I am hoping rates climb and lock in some long term CD's much higher rates.
401k all in dividend stocks that I have been DRIPPING for years..Have 11 years more to drip until RMD time. IMO lots of the WS casino stocks still overpriced, so if some carnage, will direct some CD cash into stocks too down the road.
I know it's not maximal returns but why not use no fee CDs and then have the ability to get it all out if there's a huge emergency. You can even swap CDs upward forever if the interest rate goes up in this uncertain fed environment. For like 4% total flexibility vs 5% locked in
Oh, if you watch any of my other videos you know I'm a huge fan of the no penalty CDs. There's a 4.95% no penalty that came out today. It's a great option, but there aren't a lot of no penalty CD offerings with multiple time-frames. Still, a great option.
I have 12K in an Emergency Fund that is a CD Ladder that was spread out to 60 months... Keep in mind it is for emergencies so I could afford to have it spread out that far.. and not all emergencies are the same size..So by having it in $100-125 increments I could determine the size of the "need" and the EWP I would have to accept without breaking the whole "nut"
Been gradually condensing the ladder seeking $500 minimums and looking for smallish EWPs.
That's fantastic! You are managing your money like a pro. Many people are confused by the ladder strategy, but you are using it for one of the key reasons it exists. Well done!
Can you answer what the interest would of been in you chart for 1 year teer cd each quarter paying 5.25% on a $250K teer cd. I know that a 1 year at 5.305 investing for 1 year would make me Little over $13K. I think this is correct. What confuses me is the return because in a year from now I want to cash it all in a retire in Mexico
Hello Brian,
I am under 30, just starting my career and recently learning about high interest savings accounts CDs. I’ve found Marcus by Goldman Sachs and believe that their rates are high.
What are you thoughts on them?
Do you have any tips for somebody under 30 to maximize their savings?
Thanks :)
i must be that old
my personal experience
when i worked at a Centrust Bank 80s
i remember passbook savings at 5.00 and
CD rates as high as 13 percent MTG rates were at 7% and above depending on term
but ofcourse Home prices were in the low 70K to 100k medium home
i remember getting a home for 63k financing
50k at a 10% rate for
10yrs
monthly payment 1k yes very high but my home then was paid off in 10 yrs
wish those 13 rates came back will it happen prob not
banks just wont allow it
Wow.....that's a significant change over time.
I would welcome CD's at those rates. I do remember those days.
I have a 1 year cd that matures July 12th and its only 4%. Right now Fedelity has a 4 teer 5.15% for 1 year I am hoping its still up in July and I will do a 1 year 4 teer with $250K thank you for the great advise. How can I calculate what the interest would be for that 1 year. Math isn't my thing
If you're dealing with multiple CDs, I highly suggest using a CD calculator that is easily found online. Many of the brokerages offer them, and I find them very useful.
Would CD Ladders be a good way to invest for a down payment on a home? My wife and I have both just gotten into our careers and are looking to save for a while. The plan was to save up about 10-15k then start diversifying. But we really want a home for ourselves.
If you plan to park your cash safely, I think it's wise (my opinion). I actually reference it in some of my other videos like this one: ruclips.net/video/Oh6ibjUiZlc/видео.html
So if I choose the reinvest option does the interest rate stay the same or will it gtab the higher if they are indeed going higher? Thanks!
I'm talking about t-bills
It's a very good question. If you choose to reinvest, then it will be at the new rate......whatever that is. This is the reason I choose not to auto-reinvest because there may be other investments that achieve my goal with a higher return. But as always, it is purely up to the individual and their personal needs. I hope that helps
Hi Brian,
Great video but I have a question. I just purchased 2 cd’s through fidelity and it said price 100 when buying. What does this mean?
I'm going to try to read between the lines as best I can. If the price says $100 then it may be a fractional share. Meaning rather than buying one full share at $1,000. In that particular instance you could put a 0.1 and purchase just $100 worth. In fact I'm going over that exact item in my video that I launch tomorrow afternoon.
@@BusinessWithBrian thanks Brian but I’m not sure that’s what it means. This is what the info tab says on it in fidelity and has something to do with par value but not sure what that means exactly?
"When you buy a CD, par is the amount the bank returns to you at the end of your investment (separate from your interest payments)."
@@JeremiahMcintosh do you want to email me screen shots so I can see what you see? It all depends on the screen you're on.
@@BusinessWithBrian CD prices don't have "$". Instead, they just say, the "price" is "100". Think of it as paying 100% of the face value, not $100. What that means is that you will get back 100% of the face value at maturity + interest earned. So, if you bought $1,000 worth at the price of 100, you will get back $1,000.
Hello Brian, great video. A little confused about maturity rates. Etrade offers me around 5% on a 3 months CD. Does that mean I would get 5% of my total investment at the end of the 3 months. Thanku you.
The 5% is on an annual percentage yield. That means it's worth 5% / 12 which is the number of months. This is the percentage you get at the monthly level. You would then multiply that times 3 months. And that's the interest you would be making on your return. It's the way that they have a comparison for you to see an apples to apples on an annual basis
No. Cmon dude really? You get 25% of that. 3/12= 1/4. You would need a 12 month CD to get the full 5%.
Hi Brian, so I’ve put 5k into 3 different cds all for 1 year, ranging from 3.00-5.05% any idea what I could do on my next move
Ya, stop buying CDs and buy an index fund
Question, I have a 9 month CD for $250K maturing mid July I will make about $9K in interest. How can I avoid a 15% Fedb Tax on the $9K. Can I invent the total $259K to avoid Taxes or do I no choice to pay the 15% yearly. Im 75 and like all oldies hate paying taxes on money I already paid my taxes on.
Unless it is in a tax advantaged account, You will have to pay the interest income on the earnings.
You did not already pay taxes on that $9,000, because you just earned it.
I'm old, too. Pay your taxes.
so with the example given of four, one year, 10k cds maturing every 3 months. assuming 5% (yes i know that's unreasonable, but for ease of math), that is $500 in interest every time one of the Cd's matures.
so assuming that you reinvest the 10k back into the next 1 yr CD, you're only going to be making $500 every 3 months. $500 isn't enough to purchase another CD (min is $1000 unless you're buying fractions). And it isn't really much if you're trying to count this as a source of income.
So should you save up the $500 payments until you have $1000, and can buy one $1000, 1yr CD? ( you could do this twice in 1 year, so it would produce another $50, at intervals of 6 months)
this seems like a lot of work, and a big commitment (tying up 40k) for only $2100 profits in interest in 1 year (which takes 2 years to realize because you spend the first year building the ladder).
am i missing something?
There's a few things to review in this. The first being that your example has you buying the CD from a bank or broker that has $1,000 purchasing increments. There are a lot of CD options out there with no minimum, or much lower minimums if you like. If your goal is to use a ladder as a form of income from the interest, then you'll need more than $40K invested (if that's a key goal). If your objective is to reinvest in more CDs, then you can buy fractional CDs from a broker, or full CDs from a bank with no minimums (like Ally Bank's 5% CD ). Once again, it all depends on your financial objective. For many, it may be a short-term strategy with consistent access to cash to re-invest elsewhere when markets change. Also, there's nothing that states a person needs to have 2 year's worth of ladders. It's purely up to the needs of the person. Some may find value in only doing a ladder for one year during this time of uncertainty. I believe you have the function nailed down on a ladder, but you lack objective. Why would it make sense for you? Is it to park cash safely for a set time period where you have access to the cash on a set cadence while making a hypothetical 5%? Or is it to have a consistent flow of funds to live on in retirement? If your goal is solely to make 5% in one year with no reason to access the cash, then buying a 1 yr CD at 5% is all you need.
@@BusinessWithBrian thank you for your very informative response. i have just been trying to wrap my head around how the ladder works, and all the examples i've seen have explained that you reinvest at maturity to continue the ladder, but they never fully spell out what's happening with the interest, or how it's possibly better/worse/the same as a high yield savings account. (assuming rates are all the same for easy math). I don't have any goals for it at the moment other than to understand how it works so i can make better informed decisions.
Any advice or videos for a young person who’s on the early stages of learning to invest? Like I want to save up between 500-1000 and want to invest it in something. Any recommendations?
You have something most people don't have......TIME. There's a ton of videos on the basics of investing, and I always recommend Index ETF as a great base for investing. The risk is reasonable, and the results are proven. The hardest part is to just begin investing and keep at it. The younger you start, the better you'll be.
@@BusinessWithBrian Ok, I'm 31. I kind of lost 10 years already lol does this still apply to me?
@@shameronstar7220 Good news, I didn't start till I was 30, and I retired after about 15 years. And at 31 you still have a lot of time. I have a video on the optimal order for investing, and there are several like it. It's info I wish I had when I first began investing.
T bills
I'm just getting into this. I saw your other video talking Capitol One and CD's. A commenter said the 5% CD ended on March 15th. You agreed with that. I read it on the 16th. Now I see their highest is 4.3. I have a sizable amount of savings I want to put into a CD. I don't need to access it for 3 years or more. I'm not seeing a 5% rate. can you give some advice?
@@BusinessWithBrian Thanks for your reply. I'm 79 years old and am not necessarily looking for the highest rate. I'm interested in CDs because they seem safe & simple. I just want someplace to put the extra money from my savings account & the minimun yearly withdrawal from our retirement account. Would it be "foolish" to buy, say, one $40,000 CD at a lower rate and just let it set for three years? I get conflicting views on the economy. I've looked into the reference/site you provided.
Looks like my old response was deleted somehow, so I'm responding again. Since I'm not a Financial Advisor, I can't give advice. I'm hopeful that some of my content has given you some ideas to help you out. Please share the direction you finally took.
I've been reading alot of articles mentioning how worthless 'cash savings' are in this current unstable economy and as a rookie sitting on over 1million savings do you suggest I invest in real estate, stocks or Gold?
Thanks to Powell for the rally. This time it is a real one, solid, not some fake thing not based on two months gossips about holding rates. Now we are talking real economics here. I'd suggest you consider financial advisory due to your budget as one wrong move could significantly erode it.
@bastianrusso Absolutely! Many undervalue advisors, but their expertise and risk mitigation strategies are invaluable for savvy investors. For those with busy schedules, monitoring the market is challenging, so we delegate to experts. I'm currently working with one, and my portfolio has grown to $1.3M, a 25% increase from last year, with robust diversification and inflation hedging.
@@greekbarrios Impressive! If you're willing to share, how can one get in touch with this advisor? My portfolio hasn't performed well this year, and I'm seeking guidance
Of course, I have been working with 'MONICA SELENA PARK,' and the beauty of it is that her knowledge covers a wide range of financial advisory services, including digital assets. You can look her up yourself to do your due diligence.
Thanks for sharing. I curiously searched for her full name and her website came first. I looked through her credentials and did my due diligence before contacting her. Once again many thanks.
Can 401k be used to purchase CD before retirement?
Yes you can! So long as it is offered in your 401K. You'll need to verify with your provider.
Just buy a one year cd every six months if you are a retired senior.
what if for instance i’m 20 every how long should i purchase a CD
@@damianzleal7397just put it in a savings account for now, most savings are 4-5% APY and CDs are like 5.5%, not that big of a difference
Those "60 year old" cartoon characters look closer to 80!
So you out smart the system 😂 that money being taxed too
Purchased my first CD ladder. Rates go up every day!!! So far..
Great video. Thank you so much
Great to hear!
Who’s got $10,000 to invest every 3 months? How about some investment advice for those that make under 30k a year?
I have several other videos that showcase all types of investments. Also the $10,000 is nearly a baseline to show for an example. You could just as easily be $100
T bills allow 100 min in increments of 100. You can invest in 4,8,17,26,52 weeks and are higher than cds.
I like to create a CD ladder on my own, because I want to avoid paying broker fees.... does this make sense? How secure is my money in a broker's account like Fidelity if its over $250K?
Hi Brian, thanks for the information I have a question does Charles Schwab is a good place for cd ladder thanks
Yes, absolutely. Here's a link to a video on their site www.schwab.com/content/how-to-build-cd-or-treasury-ladder
Thanks for your sharing your information
You bet!
I was going to slam this because I thought it said $10,000 per month, but then noticed it says $10,000 every 3 months. That is more realistic, but still requires quite a bit of capital.
Fair. But I wanted to remain consistent with my examples in the video.
Well I am doing 10k a month, so not a reach, as I know plenty of people could do 100k a month. I would dig that if I had the cash.
@@rickeyponder There are plenty that can afford 100k a month for a 15 month or more ladder. Unfortunately I am not one of them.
@@rickeyponder No. Just $40K, like I had used in the examples in the video. It gives you access to your $10K in principal every 3 months.
How much?
Awesome video, love the ladder concept; love how it can combine highest investment return with liquidity. Thanks!
Glad you liked it David! It's a solid strategy, but not easy to create graphics to explain. :-)
Currently on Fidelity web site CD’s are paying more than treasury’s. Would one be better off then doing a ladder with CD’S over treasury ladder? Thanks
That is completely a user preference, and whether or not the tax savings from treasuries improves its position over CDs. Both are offering great rates, so it's a unique problem we haven't had much in the past 10 years.
T bills don't tax state or local. Federal yes. CD's get taxed federal, and depending what state you live in state and local. If in a tax advantaged account like IRA,,401K etc no taxes.
Great information., thank you. Is it better to open 1 CD at 5 percent or open multiple CD's. We have a significant amount to invest and are looking for advice. Currently looking at Cap One for 11 months at 5 % thank you...
It depends on your goal. If you want frequent access to your principal, then laddering makes sense. But if you want a safe(r) investment that is guaranteed with a fixed rate.....then buying a longer term CD works too. All depends on what you want for the short and long term.
@@BusinessWithBrian thank you...
Money market funds are better option as they are liquid. I would combine Treasury Bills with a money market fund.
hey man great video. I have a question could I do this with t bills?
Yes, absolutely. That's why I showed the rates for T-bills and MYGAs. The only challenge with T-bills is they aren't offered for as many maturity time-frames as CDs. Just need to work differently with timing.
Very good video. I agree with the ladder concept and I already make use of it, as CD rates are on the rise. My only quibble with your approach is that you perform your transactions online. For security reasons, I feel more comfortable using a landline with a specified broker and asking that person what the highest current CD rate is. Also, I have changed from once every three months to once every two months, giving me 6 steps per year. When CD rates start dropping I will resume looking for cheap stocks which pay a good dividend.
Absolutely solid approach on your part. All comes down to personal preference.
When do I pay taxes on the CD dividends? I bought one a couple of months ago. My understanding is that I pay a yearly tax on that year's dividends. Is that true?
You pay tax on the interest in the year you received it. You'll be given a 1099 for your taxes.