No. of Recommendations: 1

It would be worth looking back a couple of years to see if CDs had lower yields than equivalent treasury funds. Of course, when interest rates were higher, there was a much better chance of interest rates going down than there is now, so even if the CD rate was higher, the bond find might have been the better bet, thanks to the possibility of a capital gain.


I see your point, I just think a lot of this is minutae for anyone with a substantially long event horizon. Going far enough out, it is a zero sum game, (or better stated, it SHOULD be). There is a certain cost of capital. It doesn't vary (much) from one kind of government-backed instrument to another. Any small difference are likely ot be very small, and probably random. And if they weren't random, then start up a hedge fund and exploit it but don't tell anyone because the difference would soon become negligible again.

A lot of people spin their wheels on their own personal theories. Rise up above the forest and realize that the cost of money is a commodity, and neither you nor I are likely to have the tools necessary to truly exploit any market inefficiency.

This isn't meant as a rant, I just am commenting how frequently I see discussions like this on the boards, when everyone thinks they've figured out some way to jack up the return. Interest in government backed debt is a commodity - probably one of the largest commodities in the world. There is no way that one class of US govt backed debt is going to consistently perform substantially better than another. If you believe in indexing, then go with the Total Bond Index fund and spread out among maturities and risks in just one fund. If interest rate changes worry you, there are ways of hedging that (seldom discussed on this board though) - gold metal & futures & mining stocks, interest rate futures and swaps, shorting treasuries.

My thing against CDs is the limit. I don't want to have to keep adding new accounts to get around the 100k limit, and if we ever actually need that limit things will be far worse off than most of us could imagine anyway.

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