good place to invest money?

Hi,

I has posted a while ago about what to do with my money and the used
the replies that I got to manage my portfolio.

I had some questions about the rates right now: In my last posting
people advised me to buy some 3-6 month CD's, which offer rates of
around 3.8% (bankrate.com) But with HSBC offering 3.75% in interest
rates on a savings account, CD's are not really worth it at this point.
Which brings me to my next point that, if savings account are offering
such high rates, wouldn't it logically make sense for CD's to go higher
in value? I have about 10K saved up right now that I am about to put in
the HSBC savings account.

What other money market instruments to you guys recommend w/my 10K?
I dont need the money to be very liquid, but if I am getting almost the
same money in a savings account as in a fixed income product, i would
much rather put it in savings. Are there any other fixed income
instruments out there that offer good rates right now? (somewhere
around 5-6% would be good, or is that being way too optimistic?)

Thank you.

Re: good place to invest money?

wrote:

> What other money market instruments to you guys recommend w/my 10K?
> I dont need the money to be very liquid, but if I am getting almost the
> same money in a savings account as in a fixed income product, i would
> much rather put it in savings. Are there any other fixed income
> instruments out there that offer good rates right now?

2-year Treasuries are currently yielding 3.9%. But you have to tie your
money up for 2 years.


> (somewhere
> around 5-6% would be good, or is that being way too optimistic?)

You don't get something for nothing.
For a higher yield, you have to accept either a longer time horizon (tie
up your money for a long time) or increased risk or both.

30-year Treasuries are currently yielding 4.4%. But you have to tie
your money up for 30 years.

The only thing I can think of that might be yielding 6% is lower-quality
corporate bonds. And I wouldn't advise a novice to try to buy
individual junk bonds. You could buy a so-called "high yield" (i.e.
junk) bond fund, such as SPHIX. which is currently yielding 7.0%. But
then you would have a fluctuating Net Asset Value so your principal
would fluctuate.


--
Steven D. Litvintchouk
Email:

Remove the NOSPAM before replying to me.

Re: good place to invest money?

<> wrote
> Hi,
>
> I has posted a while ago about what to do with my money and the used
> the replies that I got to manage my portfolio.
>
> I had some questions about the rates right now: In my last posting
> people advised me to buy some 3-6 month CD's, which offer rates of
> around 3.8% (bankrate.com) But with HSBC offering 3.75% in interest
> rates on a savings account, CD's are not really worth it at this point.

I assume the savings account is simultaneously some sort of money market
account.

Editing for clarification follows:
> Which brings me to my next point that, if savings account are offering
> such high rates, wouldn't it logically make sense for CD's to [have]
higher
> [yields]?

In general, yes.

If you're reasoning that, the more liquid ( = lower maturity) an extremely
low risk investment is, the lower the yield will be, then yes, this is
generally true. Normally, a graphical device called a "yield curve" may be
used to confirm this. It plots bond maturity on the X-axis vs. current yield
for these different maturities on the Y-axis. As maturity increases,
normally the yield increases, too, rewarding investors for being willing to
tie up their money longer, among other things.

But there are times when this curve will flatten and even invert. The
following site has an excellent discussion and great graphics showing
historical trends on these points:



The graphs show that there were several periods in the last twenty years
when short-term bonds paid a higher yield than long-term bonds.

In the last year or so, the yield curve, has flattened somewhat.
Shorter-term bonds (and CDs) are seeing rising yields, while five-year
bonds/CDs are stagnant.

The fact that some money market offerings are meeting 3-month CD offerings
reflects this, as well.

There are economically rational explanations for this. See the site above.
For your purposes, it sounds like all you should care about is maximizing
yield at very low risk and staying liquid.

I think the truth is you're splitting hairs right now over minuscule
differences in yield. Today I was looking at some money market funds
Fidelity offers and noticed that the average maturity of one of its money
market funds is about a month. It's yielding 3.2%. I don't know what HSBC
does exactly, but I'd wager whatever it's holding has a similar average
maturity.

One simply cannot predict well where rates are going to be a month from now.
I think they're going up, but by how much? One can go crazy trying to
predict the future. Stop now. It can't be done with much, if any, precision.

If you keep all you have in a money market fund, then its yield and 3-month
CD yields next month may both be lower. So you would have missed an
opportunity by not buying a 3-month CD today. On the other hand, the
opposite could also be the case. We just can't say which will be the
superior investment in a month.

The good news is that the difference in yields is not likely going to be all
that great.

> I have about 10K saved up right now that I am about to put in
> the HSBC savings account.
>
> What other money market instruments to you guys recommend w/my 10K?
> I dont need the money to be very liquid, but if I am getting almost the
> same money in a savings account as in a fixed income product, i would
> much rather put it in savings.

Sure. Why don't you just keep watching the money market rates, 3-month, and
6-month rates for the next year or so, and use this as an educational
experience. You might come out ahead by keeping all your $10k in the money
market. You might end up having been better off with a CD ladder. Either
way, the difference is going to be small.

> Are there any other fixed income
> instruments out there that offer good rates right now? (somewhere
> around 5-6% would be good, or is that being way too optimistic?)

If you want low risk and liquidity within a few months, then you won't be
able to obtain this sort of yield right now.

If you want to take on more risk, there are certain high yield, large cap
stocks; low grade corporate bonds; small REIT stocks; and preferred (hybrid)
(and so generally high yielding) stocks you could consider. But these all
involve a risk to the principal.

What are you saving up for again?

Re: good place to invest money?

Thank you very much for your reply. After reading your post and the
information on the site you mentioned I do have a better understanding
of the subject.

> I assume the savings account is simultaneously some sort of money market
> account.

> Editing for clarification follows:

I am not sure if its a money market acount. But they do have a 3.75%
ratre.

To sum up (to my knowledge), the 3.75% that I am looking at and seems
very lucrative could be a short term rate. HSBC could decide to
decrease (or increase) this rate at their will. And thus if I get a CD
for 3 months witht his rate, it is guaranteed to give me those returns,
while a liquid savings account it not. Does the above make any sense?


> What are you saving up for again?

I just started working (software engineer) and have money saved up from
my work, and not sure where to "put" it. have been trying to gain an
understanding of the workings of finance, but have a long way to go.
So, if you had this 10K where (in your personal opinion) would you
choose to invest it?

And just to clarify an above point, HSBC has no obligation to pay me
3.75% for any amount of fixed time, rite? They could change that rate
as they please or would they have to give me some prior notice?

Thank you very much.

much appreciated..

Re: good place to invest money?

<> wrote in message
news:
> I am not sure if its a money market acount. But they do have a 3.75%
> ratre.

It's a statement savings account, not a money market account (not that this
matters at all). FWIW, here's HSBC's list of internet accounts (you'll see
various savings accounts, including a couple of money market accounts):
',575,375,'cmd_ViewDepositRates'

HSBC also offers true money market funds (i.e. accounts that are not
FDIC-insured, are not bank deposits, but rather real funds), but these are
only offered off-line, and probably are paying less right now.

> To sum up (to my knowledge), the 3.75% that I am looking at and seems
> very lucrative could be a short term rate. HSBC could decide to
> decrease (or increase) this rate at their will. And thus if I get a CD
> for 3 months witht his rate, it is guaranteed to give me those returns,
> while a liquid savings account it not. Does the above make any sense?

Yes. Except for time deposit accounts (CDs, where the deposit is for a
fixed period of time), banks can change rates up or down at any time.
Decades ago, a distinction between "savings accounts" and money market
accounts was that interest rates on the savings accounts were relatively
fixed, while money market accounts varied. Now they can all change at the
bank's whim, except for CDs.

Remember, though, that the bank could just as easily raise its rate as
reduce it. I would not expect this account rate to drop for some time
(since the Fed isn't going to be reducing rates, and HSBC is trying to gain
or at least hold market share).

> > What are you saving up for again?
>
> I just started working (software engineer) and have money saved up from
> my work, and not sure where to "put" it. have been trying to gain an
> understanding of the workings of finance, but have a long way to go.
> So, if you had this 10K where (in your personal opinion) would you
> choose to invest it?

This is a good place to keep "emergency cash" (6 mo. - 1 year worth of
expenses) now - it is liquid, and you won't be able to eek out much higher
rates without taking on risk and/or tying up your money for longer periods
of time. If you really mean investing, the next question would be are you
investing for retirement (in which case you should look at 401(k)s, IRAs,
etc.), or for something shorter term (house, family expenses, car, etc.)

> And just to clarify an above point, HSBC has no obligation to pay me
> 3.75% for any amount of fixed time, rite? They could change that rate
> as they please or would they have to give me some prior notice?

There may be a very short notice requirement (I don't know, I haven't
checked), but if so, it's not going to be more than a week or so.

--
Mark Freeland

Re: good place to invest money?

<> wrote
> Thank you very much for your reply. After reading your post and the
> information on the site you mentioned I do have a better understanding
> of the subject.
>
> > I assume the savings account is simultaneously some sort of money market
> > account.
>
> > Editing for clarification follows:
>
> I am not sure if its a money market acount. But they do have a 3.75%
> ratre.

Thanks for the citation. Looking at the FAQ turns this up:
"What is the OnlineSavings Account?
The OnlineSavings Account is an online-only, high interest rate, easy access
retail money market account available only to consumers."

> To sum up (to my knowledge), the 3.75% that I am looking at and seems
> very lucrative could be a short term rate. HSBC could decide to
> decrease (or increase) this rate at their will. And thus if I get a CD
> for 3 months witht his rate, it is guaranteed to give me those returns,
> while a liquid savings account it not. Does the above make any sense?

Yes.

I'd only add that presumably HSBC would not be too capricious about changing
its online savings account interest rate. It is competing with other banks
and CDs to some extent, too. You can sort of monitor how it's doing relative
to others using www.Bankrate.com 's .

> > What are you saving up for again?
>
> I just started working (software engineer) and have money saved up from
> my work, and not sure where to "put" it. have been trying to gain an
> understanding of the workings of finance, but have a long way to go.
> So, if you had this 10K where (in your personal opinion) would you
> choose to invest it?

I an only respond intelligently if I know things like the following:

What, if any, debt have you? (Car loans; mortgage payments; credit card
debt? Other?)

Do you have an "emergency fund"? (Say, a year of living expenses stashed
away, separate from this $10k.)

How old are you?

Are you maxing out contributions to your IRA? Is it a Roth or Traditional
IRA?

Does your employer offer a 401(k)?

Do you plan to marry and have kids anytime soon? (Sorry; personal question,
but it is extremely important to one's financial planning... )

Do you plan to buy a condo or house soon? If not soon, about how many years
from now?

I suggest answering these questions, then re-post your query at
misc.invest.fiancial-plan, asking for suggestions. It is a moderated
newsgroup with a quick turnaround time for submissions (lately). When you
want suggestions for specific categories of mutual funds (e.g.
international, say), come back here and ask.

> And just to clarify an above point, HSBC has no obligation to pay me
> 3.75% for any amount of fixed time, rite?

Correct. The FAQ says as much: "What is the Rate for the OnlineSavings
Account?
The rate is one of the top money market rates in the country and is subject
to change."

> They could change that rate
> as they please or would they have to give me some prior notice?

From my experience, no prior notice is required. The rate will vary as the
market for the instruments towards which your money will go (via the bank)
varies.

But you shouldn't see extremely large changes happen overnight.

> Thank you very much.
>
> much appreciated..

You're welcome.

Re: good place to invest money?

wrote:

> Thank you very much for your reply. After reading your post and the
> information on the site you mentioned I do have a better understanding
> of the subject.
>
>
>>I assume the savings account is simultaneously some sort of money market
>>account.
>
>
>>Editing for clarification follows:
>
>
> I am not sure if its a money market acount. But they do have a 3.75%
> ratre.
>
> To sum up (to my knowledge), the 3.75% that I am looking at and seems
> very lucrative could be a short term rate. HSBC could decide to
> decrease (or increase) this rate at their will. And thus if I get a CD
> for 3 months witht his rate, it is guaranteed to give me those returns,
> while a liquid savings account it not. Does the above make any sense?
>
>
>
>>What are you saving up for again?
>
>
> I just started working (software engineer) and have money saved up from
> my work, and not sure where to "put" it. have been trying to gain an
> understanding of the workings of finance, but have a long way to go.
> So, if you had this 10K where (in your personal opinion) would you
> choose to invest it?

One of my most important rules about investing is: Never invest in
anything you don't understand. Thus it's not important what I think is
a good investment; what's important is that you understand and approve
of an investment before sinking your money into it.

Since you're clearly a novice at investing, I suggest you keep the money
liquid in a money market fund for the moment, and take the next year or
so to learn about riskier but potentially more profitable alternatives.
Don't rush to invest before you understand more about investing.
You've got your whole life ahead of you.


--
Steven D. Litvintchouk
Email:

Remove the NOSPAM before replying to me.

Re: good place to invest money?

> I an only respond intelligently if I know things like the following:
>
> What, if any, debt have you? (Car loans; mortgage payments; credit card
> debt? Other?)
>
Absolutely NO debts as of right now (Full college scholarship. Minimal
credit card expenses that I afford with my monthly income.)
> Do you have an "emergency fund"? (Say, a year of living expenses stashed
> away, separate from this $10k.)
Yes. Do have a decent amount of money my dad had invested for me many
many years ago which is maturing soon and he has also promised (and is
quite capable) of giving me an advance on it if need be. (Only because
he knows that I wont "blow" my money away, and if I need it, the reason
will be genuine).
> How old are you?
21
>
> Are you maxing out contributions to your IRA? Is it a Roth or Traditional
> IRA?
No contributions in IRA's.
>
> Does your employer offer a 401(k)?
They do. But the matching doesn't start till Dec 31st 2006. The reason
I am skeptical about investing my money in these schemes is that I wont
have it available until almost 40 years from now! And my dad has also
made some other investments for me that mature when I will be 42 52 and
62. So I would rather use my money now and try to grow it now as
opposed to waiting. I will start putting money into 401K as soon as my
employer starts matching it.
>
> Do you plan to marry and have kids anytime soon? (Sorry; personal question,
> but it is extremely important to one's financial planning... )
>
Not a problem at all. I probably dont plan to marry for another (at
least) 5 years.
> Do you plan to buy a condo or house soon? If not soon, about how many years
> from now?
This is somethign I am contemplating. And again the reason being to
cut back on my taxes. I want to invest in real-estate sometime around
next june. The reason being the obnoxious prices of houses right now,
which I believe will be a little more "normal" by next year. (Feel free
to comment on this also, as its another area I am reseraching).
> I suggest answering these questions, then re-post your query at
> misc.invest.fiancial-plan, asking for suggestions. It is a moderated
> newsgroup with a quick turnaround time for submissions (lately). When you
> want suggestions for specific categories of mutual funds (e.g.
> international, say), come back here and ask.
I will put it up on misc.invest.financial-plan also.

Do want to thank you A LOT for taking out the time to put up those
questions. Much awaiting your answers.

Thanks again.
>

Re: good place to invest money?

> Does your employer offer a 401(k)?



They do. But the matching doesn't start till Dec 31st 2006. The reason

I am skeptical about investing my money in these schemes is that I wont

have it available until almost 40 years from now! And my dad has also
made some other investments for me that mature when I will be 42 52 and

62. So I would rather use my money now and try to grow it now as
opposed to waiting. I will start putting money into 401K as soon as my

employer starts matching it.

401k's provide tax free growth. Is your father paying taxes on the
investments which are maturing?

I would open the 401k to start your own personal savings program with
your own income. Your father has done well to provide you with income
and it also appears you are appreciative of his efforts. Take this
another step for your kids. Open the 401k and start saving. 2%, 3%
4%... but start as soon as possible. The discipline you show is
learned from your father, and your kids will learn the same from you.

401k tax advantages:

1) 401k lowers your current tax burden on the income from your employer
2) 401k grows tax free
3) 401k can be rolled over to an rollover IRA if you leave your
employer
4) rollover IRA's grow tax free
5) rollover IRA's can be converted to a Roth IRA. At this point you
pay taxes on the conversion
6) rollover IRA's have withdraw rules and Roth IRAs have different
withdraw rules

some of these rules trigger a 10% penalty
some of these rules do not trigger the same penalty
some of these rules allow assets to be transferred to kids tax free
some of these rules allow you to withdraw money without penalty for a
home purchase, early retirement or medical expenses.

Re: good place to invest money?

<> wrote
> > I an only respond intelligently if I know things like the following:
> >
> > What, if any, debt have you? (Car loans; mortgage payments; credit card
> > debt? Other?)
> >
> Absolutely NO debts as of right now (Full college scholarship. Minimal
> credit card expenses that I afford with my monthly income.)

Just checking: Do you pay off your credit card bill in full every month, so
as to have no finance charges?

> > Do you have an "emergency fund"? (Say, a year of living expenses stashed
> > away, separate from this $10k.)
> Yes. Do have a decent amount of money my dad had invested for me many
> many years ago which is maturing soon and he has also promised (and is
> quite capable) of giving me an advance on it if need be. (Only because
> he knows that I wont "blow" my money away, and if I need it, the reason
> will be genuine).

So why doesn't he just give it to you now? "Rude" but important question to
consider: Is your dad holding this over your head out of some expectation
from you? Again, from my reading, this is a gamble. "Family money" can be a
very touchy subject. People generally should try hard not to make it a point
on which family relations depend.

From my reading, one of the biggest mistakes young people can make is to
count on a gift from a relative or assume a certain inheritance.

Until this money etc. is in your own accounts, under your name, I advise not
counting on this.

My sources are the books _The Millionaire Next Door_ and _Millionaire Women
Next Door_. I recommend getting the first from the library and perusing it.
It has profiles of people who made their own wealth. Most millionaires are
not so because they inherited the money. Instead, they learned how to live
within their means, build their own businesses, and invest. People who are
given money tend not to do as well. They tend not to have the motivation.

I'm writing this quickly so I'm not going to add more than the usual
disclaimer about how, sure, all this may not apply to you...

> > How old are you?
> 21
> >
> > Are you maxing out contributions to your IRA? Is it a Roth or
Traditional
> > IRA?
> No contributions in IRA's.
> >
> > Does your employer offer a 401(k)?
> They do. But the matching doesn't start till Dec 31st 2006. The reason
> I am skeptical about investing my money in these schemes is that I wont
> have it available until almost 40 years from now!

> And my dad has also
> made some other investments for me that mature when I will be 42 52 and
> 62.

See above.

> So I would rather use my money now and try to grow it now as
> opposed to waiting.

I don't understand: Do you think it won't grow if it's in your 401(k)?

By "use my money now," what do you mean? What do you want to spend it on?

Do you want to be able to stop working (that is, retire) at some point? Have
you calculated how much money you'll need invested to do so? Once you've got
a good handle on what to do with your $10k, I suggest running some numbers
on how much you think you'll need so you can live off your investments. As
an introduction, try either


uch&subzone=tools (quick and dirty)

Put in that you'll retire at age 40
tomorrow. Assume you'll live to age 80 and stay single. Assume you have a
million dollars in assets at age 40, and want $30,000 of income annually
(subsequently adjusted for inflation, IIRC) from this million bucks. Assume
a simulation success rate of 90%. Click on "See your results."

See also the "Spending in Retirement" section of
. Try all the online tools
listed in this section sometime. Or google for {"how much will I need"
retirement}

You should start putting your montly expenses on a spreadsheet now, to help
you plan for the future, and so you'll have some idea of what sort of annual
income you need to live on.

If you want a little peace of mind about access to your 401(k) and IRAs well
before age 59.5, read the following:


Then google for more commentary on IRS Rule 72(t). (This rule was alluded to
by one of the posters at misc.invest.financial-plan, as well.)

> I will start putting money into 401K as soon as my
> employer starts matching it.

Sounds good, per the discussion at misc.invest.financial-plan.

> > Do you plan to marry and have kids anytime soon? (Sorry; personal
question,
> > but it is extremely important to one's financial planning... )
> >
> Not a problem at all. I probably dont plan to marry for another (at
> least) 5 years.
> > Do you plan to buy a condo or house soon? If not soon, about how many
years
> > from now?
> This is somethign I am contemplating. And again the reason being to
> cut back on my taxes.

Make sure you look at the numbers closely. It takes a lot of house and a
large mortgage for the interest to be deductible. The financial advantages
of homeowning are not that great. They do not necessarily save money
compared to renting.

The main motivation to buy a house should be because you want a quieter,
more roomy place to live.

> I want to invest in real-estate sometime around
> next june. The reason being the obnoxious prices of houses right now,
> which I believe will be a little more "normal" by next year. (Feel free
> to comment on this also, as its another area I am reseraching).

I suggest asking again at misc.invest.financial-plan when you're closer to
having a down payment of about 20% on whatever house on which you have your
eye.

This of course runs counter to the ads one sees from mortgage lenders these
days. But remember: They want your money. They'll give you a loan with no
down payment, sure. It means more interest payments to them; less money for
you. But notice personal bankruptcies are at a record high now.

Again, I'm writing quickly and not trying to excercise tact. Take the above
as ideas on what direction you should take. Fortunately, you have plenty of
time to make some decisions, and you can modify your choices as you age.

Little aside: With the President insisting we are going to rebuild New
Orleans and the Gulf Coast, nearly doubling our annual deficit, taxes are
going up. Contribute to that Roth IRA for this year immediately!

Re: good place to invest money?

"Elle" <> wrote

> My sources are the books _The Millionaire Next Door_ and _Millionaire
> Women
> Next Door_.

You can't be serious? The millionaire woman got that way by marrying a
millionaire man. Most of these women say yes a lot, are blond, and have very
cute arses.

Re: good place to invest money?

Kathy and I thought you were an idiot from what you posted before Ed
when you tried (inadequately) to respond to what we had to say about
loser Todd Beamer. Here you left no room for anyone to have any doubt
that you are an idiot.

Ken
(massaging Kathy's shoulders)

Ed's response to Elle's response to Dufff response to Elle's response
to Duff's response to Elle's response to Duff's original post
(say it 3 times real fast....it's a mouthful!!!!!)

************************************************************ ***************************************

"Elle" <> wrote

> My sources are the books _The Millionaire Next Door_ and _Millionaire
> Women
> Next Door_.


You can't be serious? The millionaire woman got that way by marrying a
millionaire man. Most of these women say yes a lot, are blond, and have
very
cute arses.

************************************************************ *************************************

Re: good place to invest money?

On 15 Sep 2005 18:56:19 -0700, wrote:

>> Does your employer offer a 401(k)?
>They do. But the matching doesn't start till Dec 31st 2006. The reason
>I am skeptical about investing my money in these schemes is that I wont
>have it available until almost 40 years from now!

But that is precisely what is best for you. I know that 40 years
seems like an eternity to you right now, but believe me, it doesn't
seem like that when you are looking back at it. You will wonder
where the time went and how could it possibly have passed so quickly.

Having said that, I admit that I didn't put all of my savings into
my 401K. Today I have approximately half of my investments in the
401K and half outside. If you are *sure* that you have the dicipline
to keep investing and not spend it, then you could do the same.
But if not, then you should just start right now investing the maximimum
amount into your 401K.