Financial advice needed!

What are my best options in terms of a low-risk way to earn interest on money?

Right now the money is in a high yield mma with citibank. Are there better banks with higher rates?

Can anyone teach me about CDs? What are the benefits/drawbacks? What are the advantages of 1 month vs. 3 month, etc?

TIA!

Re: Financial advice needed!

I have my $ in an online savings with HSBC which when I opened it was earning 5.05% and has since dropped to 3.8% since the feds keep cutting the rates. There is no low risk way to geta great return right now although people say that this is the time to get into the market. Perhaps you should speak to a financial advisor.

Re: Financial advice needed!

This is a good explanation that I found on the web:

A money market account (MMA) is an interest-earning savings account with limited transaction privileges. You are usually limited to six transfers or withdrawals per month, with no more than three transactions as checks written against the account. The interest rate paid on a money market account is usually higher than that of a regular passbook savings rate. Money market accounts also have a minimum balance requirement.

The main thing to be mindful of with MMA's, are fees. There are a lot of banks and credit card companies out there competing for your dollars as an investor. If you are not careful you may pick an account that looks like it has a very good interest rate but behind the scenes are fees that make your expected yield substantially lower. Obviously, the more money that you are looking to invest the less likely you are to pay fees. However, depending how well your MMA performs and the other outstanding investments you have, you may have to pay a capital gains tax. What I am finding is that I need to do more research. I do not have a lot of funds to play with, and I definitely do not want all of my gains to be lessened by fees. If the MMA states it has a yield of 6.23% I expect to earn at least 5.5% minimum.

CD's-These are accounts that allow you to put in a specific amount of money for a specific period of time. In exchange for a higher interest rate, you have to agree not to withdraw the money for the duration of the fixed time period. The interest rate changes based on the length of time you decide to leave the money in the account. You can't write checks on certificates of deposit. This arrangement not only gives the bank money they can use for other purposes, but it also lets them know exactly how long they can use that money.

To be honest, I kind of like the idea of CD's. One the plus side they are much less riskier than MMA's. One bad thing is that they are not a liquid of an asset (meaning if you need to the pull your money out before the maturity date, you will have to pay to get your money back). The have maturity dates the go from 6mths all the way to 5 years. I have found some with a minimum deposit as low as $500 with rates as low as 2.64%. I have also found some with a minimum deposit requirement of $25,000 with rates as high as 5.27%. As far as I can see, there seem to be less fees associated with this investment also, because the bank needs your money, it is almost like you giving the bank a loan.

Re: Financial advice needed!

bump

Re: Financial advice needed!

CDs are very safe, but you take risks in not locking ina good rate for a long time or if you lock in, you risk missing out on interest rates going up. If you don't need money - this is good. I put my DS's money into what I thought was a good rate for 16 months and I would cringe everytime I saw the interest go up. Now I have been doing it every 6 months, but rates are going lower and I have to decide when to lock into a longer time period.

High interest savings accounts like ING are good for liquidity.

You can look for solid companies that pay high dividends. That is higher risk, but if you are in it for the long haul, you should still do well.