Earn 4% or More Return for Your Money

If you have most of your savings in the stock markets, you won’t be happy with what’s going on now on the Wall Street. Nobody will. Somehow, I become numb to the daily closing numbers because what happened today isn’t much different from yesterday, last week, or even a month ago, and try not to look my brokerage accounts unless I have to (I know what’s happening even without looking at the numbers). To get an idea on how bad things have gone so far, take a look at the following Year-To-Date performance chart of the Dow, the Nasdaq, and the S&P 500 index, losing between 30% to 35% as of October 28th. Even if you diversify your portfolio by investing in different sectors, your situation won’t be too much better because, according to Morningstar, none of the 12 sectors has positive return this year.


It’s really ugly.

On the other hand, for those who are conservative with their money by putting them into high-yield savings accounts or CDs, I guess they are pretty happy now because, comparing to stocks, the returns from the safe investments are much higher. Even after the Fed has cut its benchmark lending rate to 1%, the lowest level since June 2004, there are still plenty of places where you can earn 4.0% or more returns (at least now).

Yesterday, there was an article on SmartMoney.com talking about deals that earn 4% on cash. Some of the deals, both savings accounts and CDs, have already been mentioned in my Keep My Money Safe and Let It Grow post some time ago. One surprise to me is UFB Direct, which also offers 4.0% APY for its Traveler Savings Account. Before I only know Dollar Savings Direct (4.0% APY) and EverBank (4.76% 3-month bonus rate) have offers at similar level. Of course, the problem with these deals is whether they can keep the rates from now on given that the Fed just reduced its rate to 1% two days ago. So if you want to get a bank account with better yield than what you currently get, it’s probably better to wait a couple of weeks to see where these deals go. In my opinion, it’s unlikely the benchmark rate will be lowered even further (the last time when the Fed funds rate was lowered to 1.0%, it remained at that level for one year), so what you get now could last for a while.

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