bank rates

Where Do YOU Stash Your Cash?

CD (CERTIFICATE OF DEPOSIT) RATES Today is a bloody day on the stock market, with global markets tumbling over 5% in a single day. This is such a historical event that it calls for its own special editorial on Bankaholic.

Since I hold a basket of long-term mutual funds, I’ve been hit pretty hard this week. I’ve been looking to liquidate my mutual funds, but honestly, there really is no good place to stash my cash! Nevertheless, I’ve been doing some research, and thought I would share it with you guys.

These are the traditional options for investing cash:

  • Stocks, mutual funds, and ETFs (exchange traded funds)
  • CD (certificate of deposit) accounts and high interest savings accounts
  • Real estate
  • Bonds and treasury bills
  • Stay in cash

And now I will show you why all of these investments are not so great. Yes, it’s pessimistic, but it’s true.

Stock Market
Thanks to the credit meltdown and recession fears in the US, the stock market is only playable if you have the guts and know-how to actively trade and go short. For the brave stock traders who are interested in going short, here are a list of ultrashort ETFs: DXD, SKF, SDS, QID, SRS, FXP, MZZ, TWM. These are high risk plays, so only touch these if you know what you are doing!

My personal mutual fund portfolio was hit really hard this week even though most of my investments focus on the global economy rather than the US economy. If you are curious, I hold shares in NEWFX, ANCFX, AEPGX, CWGIX, and my portfolio is already down over 15% in 2008!

CD & Savings Accounts
At the moment, locking in interest rates on long term CD accounts is actually not a bad idea. Traders on wall street are expecting federal chairman Ben Bernanke to make a 0.50% interest rate cut when the reserve bank meets on Janurary 30, 2008, so rates will only continue to fall in the short-term.

As for high interest savings accounts, I have to admit that current mediocre rates are actually looking quite attractive. A few months ago, I was upset about my Washington Mutual savings account rate dropping from 5.00% APY. But now, they rate is actually quite good compared to everyone else.

Still, the drawbacks of putting your money in CD & savings accounts is that interest rates will continue to decline because there is no doubt that the federal bank will continue to slash rates aggressively.

Real Estate
While real estate prices have been cooling, most buyers are still waiting on the sidelines. As homeowners continue to default on their mortgages, foreclosures will continue to drive housing prices down. Home value statistics on HousingTracker show that real estate prices are still continuing to fall, with no signs of bottoming out. Stay out of real estate until we see signs that the credit meltdown is over.

Bonds & Treasury Bills
While these options may be “safe”, the return on these investment vehicles is not aggressive enough to out-pace inflation.

Stay in Cash
Unfortunately, the horrendous devaluation of the US dollar makes staying in cash an un-wise option as well. Right now is not the time to invest in the once-almighty dollar. The Euro, on the other hand, is a good investment idea.

What to do?
So what am I going to do? I am definitely going to cut my losses on my mutual fund, because I have very little faith in the markets right now. I will probably take that cash and stash a good portion in a long term (3yr+) CD. I will also add more to my 4.25% WaMu savings account in case of emergencies.

I am also looking into investing in gold. What’s interesting about gold is that because gold is priced in US dollars, buying gold is actually a nice hedge against the deteriorating dollar. For example, if I buy an ounce of gold for $800 USD, and tomorrow the USD drops 50% in value, I still have an ounce of gold, except now it is worth $1600 USD. Do you see what I mean?

Finally, I am researching the FXE (Euro Currency Shares Trust). What’s cool about the FXE is that it trades like a stock, but is pegged against the Euro. So as the Euro becomes a more powerful currency, shares of FXE increase in value. This is a great way for American people to invest in the Euro currency.

Now it’s your turn. Where do YOU stash your cash?

And a video about how the weakening dollar weakens you.

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Comments (25)
1 Star2 Stars3 Stars4 Stars5 Stars (27 votes, average: 3.81 out of 5)
25 Existing Comments
  1. N2D2 said:
    on January 22nd at 03:56 pm

    What cash ?
    I lost almost all of it in the dot com bubble stock market crash back in 2000-2001

  2. xaiver said:
    on January 23rd at 07:30 am

    stop whining, the dot come crash was 7 years ago, get over it and be a man

  3. Ranbok said:
    on January 23rd at 07:36 am

    under the mattress where the IRS cannot get to it! shhh!

  4. Stephen James said:
    on January 23rd at 08:26 pm

    It seems like you are talking all about the short term. I don’t think I’d ever invest in stocks for the short-term. I don’t have the time to research that. I’m buying a house this summer with +20% down and just keeping that money in my Roth IRA (MMF with 5% APY) to avoid taxes. It’s limit is 10K a year now between my wife and me, and I can’t risk losing any of it since I’m buying this summer.

  5. Pallun said:
    on January 23rd at 11:29 pm

    While the Fed continues to give its support to equity investors, it also continues to give no support to savers. It’s no wonder that the individual U.S. savings rate is near zero – and still the market and political powers to be wonder why! Well, I for one, cannot continue to fool myself into believing anything other than that the Fed is concerned about nothing more than corporate greed and bailing out the ill advised investments of the banks & its cronies. For elderly savers trying to survive on fixed incomes, but with the ability to put some assests away in bank CD’s, The Fed’s move was another kick in their crotch. Still, and now, I would search for the best CD’s.

  6. Conrad said:
    on January 24th at 02:04 am

    ahh dammit. i was going to sign up for the indymac 3 year cd last night, and today went i look at the page again, they dropped their rates!

  7. lisa said:
    on January 24th at 03:23 am

    ok……..if your investing in your 401k and its for the “future” then roll with the punches. Everything cycles and comes back around. When it tanks, your contributions buy at a lower rate so…….do the math! Also, I just put some cash into a few cd’s at around 5% or better. I figured even if they’re short-term, I’m still 5% richer than I was yesterday!!!
    Think positive 🙂

  8. Conrad said:
    on January 25th at 08:38 pm

    very optimistic thinking lisa! i like the way u think

  9. Bill said:
    on January 29th at 02:35 am

    Agree with Pallun. Vote for McCain to alleviate the problem.

  10. Bill Hopkins said:
    on January 29th at 02:38 am


  11. maria said:
    on January 30th at 02:20 am

    McCain readily admits that his strong points are foriegn policy not economics.

  12. mary said:
    on January 31st at 01:19 pm

    The Fed rate cut is definitely a bad move for retired
    folks living on fixed incomes. This means that our
    income will drop signficantly, since a major portion
    of our income is in CD’s, and we cannot take risks
    with our savings.
    Yes, this helps the irresponsible mortgage companies
    and the folks that bought more than they could afford,
    and leaves responsible people who save and live
    responsibly out in the cold.
    It’s no wonder that people don’t save anymore.
    The Government does not support it.

  13. Roger said:
    on February 3rd at 05:33 pm

    I have had a great year in 2007 accruing interest through SHORT TERM: I still am staying in MMA’s, safe, easy, and no need to worry. It may increase my gross income taxable, but still $$$$ in my pocket. LONG TERM: Eying my mutual funds are triggering my epilepsy! I will maintain my monthly investment deposits regardless of the market. This is called “dollar cost averaging”.

    Screw carrying credit card balances too!

    Just sharing that I am learning to be more money smart, not money dumb. I have made it pass that phase of my life.

  14. Dodger said:
    on February 3rd at 07:58 pm

    Buy gold……..

  15. Charles said:
    on February 12th at 03:20 pm

    What about TIPS? They are T Bills that are guaranteed to match inflation (but will not deflate below the original investment) I don’t see a down side here.

  16. Drake said:
    on February 12th at 05:44 pm

    You can TALK your way into a recession, but you have to WORK your way out! I refuse to participate in a recession.

  17. ron said:
    on February 15th at 10:47 pm

    Finally, I am researching the FXE (Euro Currency Shares Trust). What’s cool about the FXE is that it trades like a stock, but is pegged against the Euro. So as the Euro becomes a more powerful currency, shares of FXE increase in value. This is a great way for American people to invest in the Euro currency.

    How do I short the euro agazinst the dollar?

  18. Peter said:
    on February 29th at 12:01 am

    What are the best investments to get into? Im a beginner & only have experience with online savings & CD’s. If anyone could help me more in depth I would really appreciate it. My email is

  19. Peter said:
    on February 29th at 12:02 am

    Ron is there anyway we could talk about the FXE more in depth?

  20. Mr. Logic said:
    on March 3rd at 09:48 pm

    This post is exactly what you DO NOT want to do – Buy Euro’s????? That’s like going to the clothing store and seeing that shirt prices are higher than they have ever been and getting excited!! Or, buying companies at their all-time high!!!!

    Furthermore, gold is NOT perfectly negatively correlated (-1) to the dollar, so if the dollar drops 50%, then Gold will not double – you really need to be more accurate in your posts so you don’t mislead some innocent people.

    Can you be any more simple-minded and crowd-following? Please people go find some advice from a real professional and not just some website guy who knows search engine optimization!

  21. firas khlaiwi said:
    on March 11th at 02:40 am

    give ore info

  22. Rick Cain said:
    on March 21st at 07:42 pm

    McCain’s strong points are in foreign policy? The man didn’t even know the difference between a shia and a sunni arab, and he thought Iran funded Al Qaeda!

    Iran secretly helped the USA in its invasion of Afghanistan because they hated Al Qaeda so much they were willing to swallow their pride and fund the Northern Alliance!

    If McCain wins the november election, game over everybody, The USA becomes a failed state. I may have to move back to Europe.

  23. Lori said:
    on March 24th at 09:24 am

    I’ve opened up a no fee checking account online that pays 6.01% APY. The bank is Charter Bank out of Sante Fe, New Mexico. The checking account is called Turbo Checking. There are 4 monthly requirements to get the outstanding APY but I do this anyway so why not get paid for it. There are no minimum balance or monthly service charges even if the 4 monthly requirements are met.
    The monthly requirements are 1) you must make 10 debit card point-of-sale transactions 2) you must have one direct deposit or ACH auto debit, 3) you have to receive electronic statements, and 4) you have to access online banking at least once a month. If these requirements are not met then the APY is 0.25%. The only drawback that I can see is that you only get the 6.01 APY if your account is less than $25,000. Then the rate drops to 1.01%. I personally don’t keep this much in a checking account so it’s not a problem for me. The minimum opening deposit is $100.