Personal Finance Topics / Retirement Investing
No. of Recommendations: 6
Brokered CDs
Bought through a stock broker account.
These seem simpler and better than going directly to the bank. I used to spend a lot of time looking at CD rates at bankrate.com and similar web sites.
No need to go to the bank(s) webpage and open an account and fill out an application. Just look up the CDs at your broker's bond/cd desk and click the BUY link. They handle everything. The broker page breaks down the available CDs by length (6 mo, 9 mo, 1 yr, 5 yr, etc.). Click on the maturity you want and look at the list of available CDs, ordered by yield. No commission. All FDIC insured.
Etrade, Schwab, Vanguard, etc.
Plus the brokered CD do not automatically roll over like they do at the bank. At maturity the money comes out of the CD and gets deposited to your brokerage account.
Generally you must buy in multiples of $1,000.
In my (limited) experience the brokered CD pays better interest than you can get directly from the bank.
Ex: Brokered 6 mo CD from Ergo Bank pays 5.35%. Settlement date is 7/19/23, maturity is 1/19/24.
The Ergo bank web site lists 182-day CD yield 2.87%.
One little gotcha. It is now 7/13 so you'd think that you could wait until 7/18 to place your order. Nope.
The broker has a specific number of CDs of each issue (in $1000 increments). When I first looked at that Ergo listing there were 126 available. About 15 minutes later when I decided to buy $5,000 there were only 18 available. Now after another 20 minutes, there are NONE available.
You snooze you lose. It took me a time to realize what was happening, and I lost out on a few great yields until I did figure it out.
You can also buy Treasuries at the broker. Simpler than TreasuryDirect, one stop shopping.
No. of Recommendations: 1
I haven't bought a brokered CD. I use treasuries for my fixed income investing at this time. Got a ton of them. I rarely buy them at auction but instead just buy them through my brokers (I've used Schwab, Fidelity and TD Ameritrade) w/o any issues. I've yet to sell one so I'm not sure how that works.
I did some reading up (so take that for what it is worth) and read that CDs are FDIC insured but brokered CDs are NOT.
Rich
No. of Recommendations: 4
read that CDs are FDIC insured but brokered CDs are NOT.
Just checked with Fidelity, Schwab and TD Ameritrade, they all say their brokered CD's are fdic insured.
RAM
No. of Recommendations: 2
I use treasuries for my fixed income investing at this time. I rarely buy them at auction but instead just buy them through my brokers (I've used Schwab, Fidelity and TD Ameritrade) w/o any issues.
Hmmmm. Quickly looking, it appears that most of the secondaries tend to be minimum 10 (10 * $1,000 = $10,000). Just a note of interest.
New brokered CDs look to pay a bit more yield. At Fidelity, 1 yr CD are 5.4%, 5.3%, 5.25%.
1 yr Treasuries 5.309%, 5.297%
I'm just starting to get back into fixed income things, now that interest rates are off the floor. Is there any particular advantage of CDs vs. secondary Treasuries? Treasuries not subject to state income tax?
