No. of Recommendations: 2
Thanks Charlie. I agree with pretty much everything you said.

I am still 20-30 years from retirement (depending on how the market performs!) and have never bought a CD.

I'm in the market for a CD now because I have some $$$ that I need to send to Uncle Sam on April 15th. I don't think the IRS will take an IOU and a picture of Ben Bernanke if I lost it on the stock market between January and April :-)

I was just amazed at the difference between the money market rates and the 5-year CD rate even with the penalty, and that led me to question the whole "CD Ladder" thing.

Having said that, if I were in my 60s I would still want some kind of safe-as-safe-gets cash beyond my emergency fund - perhaps a year's living expenses - in something like a CD. While you are absolutely correct that you lose purchasing power on it year-on-year due to inflation, it protects that cash from a major bear market and gives time for beaten-down investments to recover. If I wanted to keep cash for cash's sake, I would probably look at TIPS to protect from inflation.

In the recent downturn I've seen some of my older family members - responsible, intelligent, fiscally-aware people - have to take drastic steps because their stocks were so beaten down and they didn't have enough stashed away in fixed investments. I believe cash and cash-equivalents have some place in a portfolio, depending on your age and outlook...


Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.