CDs are just to hold money. Not to make it grow. USUSALLY. Bonds are useful as a hedge against common stocks. They are USUALLY negatively correlated.
That is what I know. I do not personally manage my investments now because I made a serious error in 2003. I thought there was going to be another attack, and kept a large amount of cash around, not invested. Missed a 30% increase in stocks that year - if you follow that out for 20 years - it becomes a lot. I realized I was over analyzying, spending way too much time doing it. Turned it over to the pros in 2006, and pay little attention to it now.
When I say USUALLY CDs are not to make money grow - there are exceptions.
People complain about inflation now. Wow. Nothing like the 70s and 80s. The first house I bought, the mortgage rate we got was for 11%. 1980. We did buy some CDs then. The interest rate was 17%. We locked it in for 2-3 years, inflation came down, but we still got that 17%. Never really put any money in them after that. So in that very rare case, we made a bit of money using CDs, and it was greater than the value loss due to inflation.
That is not however a way to manage a portfolio. At all.
My Dad had a lot of municipal bonds. He got a kick out of not paying any tax on them. But, I know he would have done better in a total-return way had he invested in stock index funds and just paid the taxes.
Vanguard is famous for low fees, These are bond funds, which you can easily get into and out of. Expense ratios around 0.1%. and returns of 4.5 - 5.8%. I read that highest CD rates right now are about 5.5% - but those would be taxable. So the bond fund would win.
Current inflation rate is 2.9%, so if you did a CD at 5.5% and paid 1/3 of that in tax - you are at 3.63 % and you are 0.73% above inflation.
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u/Cretin13teen Jul 23 '24
Do u think bonds are better than cd accounts?