[Lateralus]

I've always kept my money in my checking account. A bit of stupidity and a but of laziness I suppose.

But now that I have a decent amount sitting in there, I figure I might as well let it earn me some interest while it lies stagnant.

What I'm wondering is what are the advanatges of going with a CD over a higher interest rate savings account?

Admittedly, I'm new to this. But when I see savings accounts offering 5% or higher interest rates and CDs seemingly in the same range but with penalties for accesing your money before the term of the CD is over... I don't see the advanatage over the savings account.

Thanks in advance.

[Chuckit]

I've been looking into this sort of thing as well recently. From what everyone's told me, if you can get a good interest rate from a savings account over the same term that you'd hold a CD, there's no advantage to the CD. The idea behind a CD is that it has a relatively high interest rate that won't change — but if a savings account is offering a better rate, that advantage doesn't exist anyway.

[nonhuman]

A savings account is more liquid. You can withdraw your money at any time with no penalty (subject to certain regulations such as a monthly limit on withdrawals). With a CD you pick a time period when you open the account, usually at least 6 months. During that time period you earn higher interest than you would with a savings account, but you can't withdrawal your money until that time period is over (or at least you can't without penalties, I'm not entirely clear on that point).

With the new high-rate savings accounts that you see online now, CDs become a lot less attractive due to the relatively low interest rates. However the online savings accounts often have similar disadvantages. I have one through Emigrant Direct with a 5.05% APY. It's a savings account, so I can take the money out whenever, but since it's online only the only way to get my money is to transfer it to my checking account with a local bank which takes a full day (transferring money between my savings and checking accounts at my local bank is instantaneous). Other online-only accounts, such as the ones offered by HSBC, sometimes have 3-day or more transfer times giving you a little less flexibility with your money.

This is how I use the different kinds of accounts for my personal finances:
I actually currently have a checking account and a savings account with a local bank (Wainwright), and two savings accounts and a CD with Emigrant Direct. My Wainwright checking account is where I keep my money for the month. I try and budget so that every month I make one large transfer from my Wainwright savings account to it and that's the money I use to pay my bills and other expenses for that month. My Wainwright savings account is where I keep a cash reserve for unexpected expenses, and just a place to keep my money before I need it in my checking so I can earn a little interest. I try and maintain about 2-3 months worth of expenses in that account. Any other money I earn goes into my main Emigrant Direct savings account where I've got a large cash reserve that's left over from stock I sold to make a down payment on our condo. I try and keep about 6 months worth of cash reserve in there. My second Emigrant Direct savings account is a wedding fund. My Emigrant Direct CD is where I keep the cash deposits from our old apartment that we're currently sub-leasing out.

[ghporter]

The advantage of a savings account is funds accessibility, albeit limited availability. The advantage of a CD is usually a higher rate of return. Today, savings products are retail products, and they have a lot of variety in what they offer and what they limit. My checking account, for example, pays interest on my balance at the end of a statement period, but it's the "average balance" over the month, so income and outlay (mortgage payments, etc.) tend to keep that balance fairly low. My savings account pays a slightly higher rate. If I had a higher minimum balance in savings, they'd pay a higher rate.

It comes down to shopping and comparing offerings.

[Lateralus]

Well I just opened a WaMu savings account with 5% interest rate. I was looking at their CD offering as well, which offers 5.40% and is online only.

But it doesn't look like 0.4% is really worth the hassle.

[Oisín]

The savings account won’t play when you put it in the stereo.

[nonhuman]

Originally Posted by Lateralus 

Well I just opened a WaMu savings account with 5% interest rate. I was looking at their CD offering as well, which offers 5.40% and is online only.

But it doesn't look like 0.4% is really worth the hassle.

It really depends on how much money you want to put into the account, and how long you want to set it aside for. .4% of $100,000 isn't bad, especially if you compound it over a few years.

However I'd caution against opening any long term CDs now. Interest rates are very low, and could easily go much higher in the next couple years. The best time, I think, to get a CD is when the interest rates are relatively very high. Then just put as much money as you can afford to into one and leave it there for a very long time. You'll get to keep that high interest rate.

For example, I have a 30 year CD that my uncle opened for me back in the 80s. It won't reach it's term for about 10 more years, but it's earning something like 12% interest.

[Lateralus]

Well, while I've got some attention;

I decided to put some money in stocks as well. Opened a TD Ameritrade account a few days ago. Transfered an amount from my checking account which now has appeared in my Account Balances field on the TD website. However, it has not reflected in my bank account balance.

I'm assuming that the money will not be officially withdrawn until I buy stock? And that the reason I had to wait a few days for the amount to appear in my Balances field with TD was because all they did was verify that I actually possess that amount?

Beyond that, I get stuck here;



Now, I'm even more new to stocks than I am to CDs and such. I didn't think making a simple stock purchase would require so much input. I was hoping to just buy X number of shares of something and then sell it manually.

What do I need to input there if I don't want any automatic buy/sell marks?

[Dork.]

Lateralus,

Wait a few days before buying anything. Things usually take a few days to clear. Your money may be going into Ameritrade's money market accoutn, in which case it may take the customary three business days to clear.

As far as buying shares goes, the easiest thing to is make your order type "market", in which case your order gets squirted to the appropriate exchange and settles at the prevailing price. You may not be getting the best price, though, because there are going to be fluctuations in the price of a stock over the course of the day. If you happen to buy when the stock is higher and then it goes down later in the day, it's your loss. A "limit" order is an order in which you aim to buy or sell at a particular price or better. If you set a limit order to buy at, say, 50 cents below the current price, and the price gets that low at some point during the day, your order will go through at that price.

It will also take three business days for the trade to "settle", which is like clearing the funds transfer.

Does anyone know whether or not you get better prices when you buy/sell in lots of 100? I thought it used to be that way, but I've sucessfully sold lots of 50 and 25 on Ameritrade, with no apparent problems....

[Lateralus]

So if I do Market, do I need to enter a price or an expiration? I basically just wanna type a quantity and hit buy.

Thanks.

[RAILhead]

Be sure to check into ING Direct: ING DIRECT - Save Your Money!

I've used them for years, and they're simply awesome.

[nonhuman]

Originally Posted by RAILhead 

Be sure to check into ING Direct: ING DIRECT - Save Your Money!

I've used them for years, and they're simply awesome.

Wow, just checked them out. Gotta say that's a great deal. If I were to use one of their ElectricOrange checking accounts along with my Emigrant Direct Savings account to replace my two accounts at Wainwright, that would be a pretty sweet deal (at least until I've got $100,000+ to put into the ING account, until then the 5.05% APY I get with Emigrant is a better deal for savings).

[Dork.]

Originally Posted by Lateralus 

So if I do Market, do I need to enter a price or an expiration? I basically just wanna type a quantity and hit buy.

Thanks.

Then you want a market order.

[Uncle Skeleton]

Originally Posted by Lateralus 

Well I just opened a WaMu savings account with 5% interest rate. I was looking at their CD offering as well, which offers 5.40% and is online only.

But it doesn't look like 0.4% is really worth the hassle.

I know that with savings accounts they can suddenly drop the interest rate without warning or even notification. They did that to my account a few months ago and I just noticed it. Of course, that account's rate was far below 5% even before the drop, so I just opened one of those 5% ones. Anyways, no guarantees it will stay at 5%.

[bradoesch]

Originally Posted by Lateralus 

So if I do Market, do I need to enter a price or an expiration? I basically just wanna type a quantity and hit buy.

Thanks.

You can leave the expiration set to 'Day' and the order will be good for that day only. If you wanted to buy F at say $7.50 you could setup a GTC (good till canceled) order that would try to buy F every day until the price hit your target. But of course you'd be using a limit order to specify your price.

I don't want to tell you what to do with your money, but I'd maybe do some paper trading first or buy an exchanged traded fund (ETF) that tracks an index before picking individual stocks. You'd also be wise to learn how to setup a stop loss before you own the stock to keep a possible loss managed.

I'd be happy to point you in the right direction if you'd like my advice on getting started. Good luck!

[Big Mac]

Originally Posted by Lateralus 

So if I do Market, do I need to enter a price or an expiration? I basically just wanna type a quantity and hit buy.

Thanks.

If you want the order executed immediately, all you do is market - expiration should fill in automatically. However, if you want to be protected, it's a better idea to set a limit price that will not fill if the stock goes up a certain amount. And if you're going to be investing or trading, it's a good idea to read up on the subject. I recommend that you start watching Mad Money on CNBC, and if you like Jim Cramer's style (some don't), pick up a copy of his new book and read his approach to investing.

[Dork.]

I second what Big Mac said. The Motley Fool's books on investing and their website Fool.com are also good resources for the beginner.

I only like Jim Cramer when he bashes my former employer.

[Big Mac]

Haha, I bet I could probably figure out what company you're referring to, Dork. Opinions will differ on what kinds of market self-education are good. I personally don't really care for the Motley Fool because they constantly send out bold solicitations to subscribe to some expensive newsletter. It's probably good information, but I don't like the continual sales pitch and especially the way they choose to do it. Forbes isn't much better in that regard.

Also, Lat, if you're going to start investing, be prepared for the strong probability that you'll see some losses, especially if you're doing short term investing or trading. The trick is to try to cut your losses before they're too painful and ride your gains. Oh, and if you're going to buy into a company, build a position gradually rather than all at once - if it goes down after you buy some, you'll be able to buy more shares at a cheaper price that way (which lowers your cost basis per share).

[Dork.]

Originally Posted by Big Mac 

Haha, I bet I could probably figure out what company you're referring to, Dork. Opinions will differ on what kinds of market self-education are good. I personally don't really care for the Motley Fool because they constantly send out bold solicitations to subscribe to some expensive newsletter. It's probably good information, but I don't like the continual sales pitch and especially the way they choose to do it. Forbes isn't much better in that regard.

Don't be so sure, there are a few rapidly declining multinational corporations in the Rochester area.

I agree with your assessment about the Motley Fool website, though. At the time I started reading up about this stuff, they were less polluted with ads and solicitations. Fortunately, their dead-tree books do not contain pop-up ads!

[gbhgbh]

One other thing to consider is that money put into a savings account, up to $100,000 I think, is federally insured whereas money put into a CD is not. Therefore the savings account would carry the equivalent of a AAA credit rating of the federal government, while the CD would carry the equivalent of the credit rating of that particular bank.