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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35930  
Subject: Re: What to do with My Savings... Date: 7/12/2010 1:53 AM
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You wrote, I was rather vague...basically, I'm not happy with my money market performance and I'm curious about what other options are out there. I'm not overly interested in buying a house, and I'm leaning towards using my savings as income stream. Just curious about how much I could expect to make, or if I'm better off leaving the money as liquid savings. Thanks for all of the help.

If this is just part of your financial plan and you have the other bases covered, you might consider direct bond or preferred purchases. They're a lot like buying a CD or Treasury note; but there's more risk. I believe the board's FAQ summarizes those risks. Perhaps you should read it before you dive in.

Lots of people are uncomfortable buying preferreds or other corporate debt. However, that is exactly what I'm doing with my much of my own portfolio. But it has risks. If you understand that you're buying an income stream for a fixed period of time and willing to live with that, buying direct corporate obligations can work out pretty well. But you should buy instruments that you are comfortable with and that will let you sleep well at night.

You mentioned munis before. If those get you a little extra income and let you sleep well, I say buy them. I may never do it because I probably won't live where the tax advantage justifies the lower returns; but munis work for a lot of people.

BTW, I mentioned CDs. If you want just a little improvement in interest rate and want to protect your principal, you should consider buying CDs at Ally Bank. Ally's long-term CDs have a 2-month early termination penalty; but a 5 year CD is paying 2.94% APY. With such a small penalty, it's worth considering them for long-term savings and just eating the penalty when rates move up enough to justify breaking the CD(s).

- Joel
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