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Matter Writer
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CDs versus Money Market
However one factor I do not perceive at the moment — how will the upcoming Fed fee drops have an effect on CDs versus VUSXX? Will VUSXX returns immediately drop 0.5% with a half-point fee drop, making it so we have been higher off locking within the 5% CD? My assumption is the CD has priced on this fee drop, and that the cash market is not more likely to drop that far.
Any and all insights appreciated!
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Re: CDs versus Money Market
I do not assume both has an upcoming fed fee discount inbuilt. If I used to be going to carry the cash for 8 months- I might purchase the CD to lock within the fee. (Supplied it’s a financial institution CD and never a callable brokered CD).
I could possibly be incorrect.
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Re: CDs versus Money Market
BogleCaliHead wrote: ↑Fri Sep 13, 2024 5:15 pm
We are attempting to determine what to do with some money that we have to hold liquid attributable to an upcoming large expenditure. My spouse is intrigued by 8-month cash markets at 5%, whereas I’m focused on VUSXX, which has a fee equal to five.18% at the moment.However one factor I do not perceive at the moment — how will the upcoming Fed fee drops have an effect on CDs versus VUSXX? Will VUSXX returns immediately drop 0.5% with a half-point fee drop, making it so we have been higher off locking within the 5% CD? My assumption is the CD has priced on this fee drop, and that the cash market is not more likely to drop that far.
Any and all insights appreciated!
Are the CDs callable?
Might be that you just will not truly get the phrases on the CD that you just count on. I’ve seen two threads right now of CDs that received referred to as (redeemed early) by the sponsoring financial institution.
Sure, the yield on VUSXX will drop quickly after the Fed cuts charges.
Regards,
“All of us could be higher buyers if we simply made fewer choices.” – Daniel Kahneman
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Re: CDs versus Money Market
retired@50 wrote: ↑Fri Sep 13, 2024 5:32 pm…
Sure, the yield on VUSXX will drop quickly after the Fed cuts charges.
+1. Recall studying the debt time period held by mmkt funds is 60-90 days, so ought to see any fee change (±) impact throughout that point interval.
d.r.a., not dr.a. | I am a novice investor; you’re forewarned.
Re: CDs versus Money Market
SmileyFace wrote: ↑Fri Sep 13, 2024 5:27 pm
I do not assume both has an upcoming fed fee discount inbuilt. If I used to be going to carry the cash for 8 months- I might purchase the CD to lock within the fee. (Supplied it’s a financial institution CD and never a callable brokered CD).
I could possibly be incorrect.
Brokered CDs could also be callable or non-callable. They’re recognized as such.
Re: CDs versus Money Market
Shopping for US T-bills is yet another possibility you possibly can think about. Shopping for a T-bill instantly allows you to lock within the fee till maturity like a CD, however you do not have to fret about it being callable. Curiosity earned on T-bills are additionally state tax exempt, which can make the yields aggressive when you reside in a state with excessive earnings taxes. And T-bills are very liquid so you possibly can promote them earlier than maturity on the secondary market, whereas CDs usually have early withdrawal penalties.
Re: CDs versus Money Market
OP – you have not specified the amount of cash in query (and understood when you do not wish to achieve this) – if the quantity is say $20K, then the variations between the aforementioned choices over 8 months (ignoring rate of interest drops for the second) are most likely lower than the price of a takeout dinner for 2. In that case I might personally simply do what’s best. Keep in mind that your time (establishing new accounts, determining tips on how to purchase non-callable CDs, T-bills, transferring cash and so forth.) has worth additionally.
