Maximize Returns on Cash Now! January 15, 2008Posted by pf in Expenses and Savings.
Tags: Ben Bernanke, cash, CD, FDIC, fed, foreign currency, interest rate, rate cuts
Recenly, the our Fed Chairman, Ben Bernanke had communicated very clearly that the Fed would cut interest rates further if the weak economy needs help:
“We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks, ” he said.
Many pundits are now suggesting that the market is gearing for as much as a half-point rate cut from the Fed at the end of January. I strongly encourage everyone to take action now to maximize their returns on their excess cash NOW. It’s very clear that interest rates are headed one way, and that’s down.
This is one of the rare things where you can bascially see what’s coming and have an opportunity to act before the actual event. Don’t get caught making sub-par returns because you were too lazy to do something about it.
For myself, I plan to do one or both of the following:
1) Go ahead and invest in a foreign currency CD, either via an FDIC insured vehicle or directly through an issuing local bank (if possible). The amounts will be dependent upon the method as the risks for each are not created equal.
2) Open another CD at the best interest rate I can find. I don’t like locking up my money, but unless I see a need for it in the next 12 mos, I’m going to do just that. You may recall I had already setup one for $60K @ 5.65%. I intend to do something similar with another $40K or so.
Again, the rate cuts are coming and with the additional potential of a recession still looming, they don’t look like they’ll be stopping any time soon. Act now.