Comments on: Certificates of Deposit: Pros & Cons Weighed

By: BloggingBanks

BloggingBanks — Mon, 27 Oct 2008 19:47:42 +0000

Actually one could create a CD ladder by utilizing a variety of maturities out there. I like CD’s because you are locked in and know how much money you have. With savings and checking accounts you can always check it and have the tendency to withdraw money for things you don’t want to spend on.

By: kitty

kitty — Wed, 22 Oct 2008 15:25:58 +0000

You can also buy municipal bonds directly. With the current credit crisis there are some attractive yields on AA and AAA municipal bonds. Sure it’s not insured, but the probability of default with AAA bonds is low. I just bought a NY State AAA 10-year municipal bond with 5.38% tax free yield to maturity (YTM). Sure it’s 10 year, but if interest rates go down, the resale value will go up. I also saw municipal bonds with 1- and 2- year remaining to maturity with tax free YTM of over 4%. In my tax bracket it’s pretty nice. Last week was better – I guess because of tighter credit – but I needed time to transfer cash to my brockerage account….

Unlike Vanguard money market, if you buy individual bonds you lock in the rate whereas with money market the rate is variable. Also, with individual bonds you have an option of waiting to maturity.

By: HokiePerogi

HokiePerogi — Tue, 21 Oct 2008 20:36:07 +0000

I was wondering where you saw a tax equivalent yield of around 6% for the Vanguard Tax Exempt Money Market fund?

Using the compound yield of 3.24% on Vanguard’s fund information page and applying a 28% tax bracket, the equivalent is only 4.5%.

Even at the “Since Inception” yield of 3.87, that’s only a tax equivalent yield of 5.375%.

Am I calculating my number wrong or pulling my data from the wrong source?