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Author: activeREinvestor Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75532  
Subject: Re: 5.37% three month CD at EvergreenBank Date: 12/3/2004 4:47 AM
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You are chasing a higher interest rate by taking on foreign exchange (FX) risk?

Is the increased rate really material when you add up the extra interest? How much does the currency have to move before you find the extra interest is wiped out? Is the interest being earned in a tax efficient vehicle or will you be losing a bit to taxes?

If you could invest the same amount in a deal that paid 8.0% fixed for 5 years with no risk to principle if rates rise would that be interesting? This investment is called 'discounted notes.'

Then there are 'tax lien certificates'. 8%-16% interest rates. 0-3 years is pretty common (varies by state and there can be early pay-offs). Secured by real estate and collection is handled by the county government.

Neither of the two above are mainstream like CD's. Both are popular with older investors and have long histories. What I am suggesting should be no more 'oddball' then CDs with an FX rate risk. Both can be held in a traditional or Roth IRA if you use the right custodian.

IMHO - If you are looking for something different that can pay a better return at least make it a significantly better return. You can earn better returns by investing in your education of less well known alternatives.

John
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