High-Yield Savings, CDs, or Money Market Fund

[TexTexTex]

Hello all,

Short version: I've got a $25K bonus that I'd like to maintain in cash, but I also want to take advantage of some interest-earning potential. There are several options available:

1. High Yield Savings Accounts such as these: https://www.nerdwallet.com/rates/banking/savings-accounts?trk=nw_gn_5.0
2. CDs: Seeing rates at varying banks ranging from 3-5%.
3. Money Market Funds - Not sure which to consider. I currently invest through Fidelity and Bank w/ Chase & Wells Fargo. Any recommendations are greatly appreciated.

A few other quick notes:

I'm currently maxing out 401K contributions and backdoor'd my Roth-IRA. Given that the majority of my net worth is in stocks (no real estate), and the rest of my net worth is in my emergency fund, it seemed wise to keep this bonus money in cash for a few months. The financial forecasts from multiple sources I follow are not looking great, and given that rates are up, felt it was wise. My intention will be to eventually invest this bonus in stocks.

Any advice would be greatly appreciated. Thanks!

[RWD]

The financial forecasts from multiple sources I follow are not looking great, and given that rates are up, felt it was wise. My intention will be to eventually invest this bonus in stocks.

Why not put it in stocks today? Is holding cash part of your investment policy statement? I'm personally using VMFXX money market fund but that's only because I need the cash for a down payment imminently.

Spoiler: show

1/2013  [SP500 = 1462]
https://forum.mrmoneymustache.com/investor-alley/is-now-a-bad-time-to-invest-in-stock-index-funds/
5/2013  [1583]
https://forum.mrmoneymustache.com/investor-alley/starting-today!/
https://forum.mrmoneymustache.com/investor-alley/$80k-sitting-in-cash-bc-scared-of-high-flying-stock-mkt-punch-me/
10/2013  [1695]
https://forum.mrmoneymustache.com/investor-alley/stock-market-expensive-now-alternatives/
5/2014  [1884]
https://forum.mrmoneymustache.com/investor-alley/stock-market-is-high-am-i-too-late/
https://forum.mrmoneymustache.com/investor-alley/is-the-stock-market-too-expensive-to-get-back-in/
7/2014  [1973]
https://forum.mrmoneymustache.com/investor-alley/current-market-has-me-scared-to-invest/
9/2014  [2002]
https://forum.mrmoneymustache.com/investor-alley/is-it-a-good-time-to-invest-new-money/
10/2014  [1946]
https://forum.mrmoneymustache.com/ask-a-mustachian/stock-market-would-you-buy-now-or-wait/
1/2015  [2058]
https://forum.mrmoneymustache.com/investor-alley/stock-market-should-i-be-concerned/
3/2015  [2117]
https://forum.mrmoneymustache.com/investor-alley/talk-me-out-of-timing-the-australian-market/
12/2015  [2103]
https://forum.mrmoneymustache.com/ask-a-mustachian/where-to-put-a-large-windfall-with-stock-market-near-all-time-highs/
1/2016  [2013]
https://forum.mrmoneymustache.com/investor-alley/about-to-sell-everything-talk-me-off-the-ledge-(or-push-me-off)-please!/
4/2016 [2073]
https://forum.mrmoneymustache.com/investor-alley/here-it-comes-red-dow/
2/2017  [2280]
https://forum.mrmoneymustache.com/investor-alley/does-anyone-think-we-are-in-a-bubble/
4/2017  [2359]
https://forum.mrmoneymustache.com/investor-alley/top-is-in/
6/2017  [2430]
https://forum.mrmoneymustache.com/continue-the-blog-conversation/recession-coming/
8/2017  [2476]
https://forum.mrmoneymustache.com/investor-alley/getting-scared-of-stock-market/
1/2018  [2696]
https://forum.mrmoneymustache.com/investor-alley/nervous-about-the-market/
3/2018  [2678]
https://forum.mrmoneymustache.com/investor-alley/when-would-you-get-back-in/
5/2018  [2655]
https://forum.mrmoneymustache.com/investor-alley/investing-in-a-bull-market/
6/2018  [2735]
https://forum.mrmoneymustache.com/investor-alley/moving-to-cash-market-timing-can%27t-believe-it/
10/2018  [2925]
https://forum.mrmoneymustache.com/welcome-to-the-forum/sell-index-funds-now-for-down-payment-during-recession/
2/2019  [2707]
https://forum.mrmoneymustache.com/investor-alley/welp-i'm-going-to-take-a-stab-at-timing-the-market/
4/2019  [2867]
https://forum.mrmoneymustache.com/investor-alley/buy-vtsax-now-while-its-this-high-or-wait-till-a-drop/
https://forum.mrmoneymustache.com/investor-alley/how-concerned-are-you-about-the-everything-bubble/
5/2019  [2924]
https://forum.mrmoneymustache.com/ask-a-mustachian/scared-of-investing-in-the-stock-market-now/
6/2019  [2890]
https://forum.mrmoneymustache.com/uk-tax-discussion/global-index-tracker-is-so-high!-do-i-just-keep-putting-my-money-into-it-anyway/
7/2019 [3026]
https://forum.mrmoneymustache.com/investor-alley/would-you-106836/
8/2019 [2889]
https://forum.mrmoneymustache.com/investor-alley/vtsax-and-a-looming-recession/
9/2019 [2978]
https://forum.mrmoneymustache.com/investor-alley/recession-in-2-ish-years-scale-and-nature/
10/2019 [2986]
https://forum.mrmoneymustache.com/investor-alley/advice-needed-108726/
11/2019 [3110]
https://forum.mrmoneymustache.com/investor-alley/questions-from-37yr-old-that-very-recently-became-serious-about-fi/
https://forum.mrmoneymustache.com/investor-alley/where-to-invest-my-cash-now/
12/2019 [3169]
https://forum.mrmoneymustache.com/ask-a-mustachian/help!-i-dont-know-where-to-start/
https://forum.mrmoneymustache.com/investor-alley/the-old-excuses-for-down-swings-and-a-reality-yet-we-are-at-all-time-highs!/
1/2020 [3296]
https://forum.mrmoneymustache.com/investor-alley/what-to-do-with-a-large-sum-of-money-bad-time-to-buy-index-funds/
2/2020 [3345]
https://forum.mrmoneymustache.com/real-estate-and-landlording/in-a-pickle/
6/2020 [3125]
https://forum.mrmoneymustache.com/investor-alley/august-is-when-it-all-implodes/
https://forum.mrmoneymustache.com/investor-alley/should-i-move-my-bond-etf-to-money-market-fund-or-cd/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-struggling-to-not-sell/
8/2020 [3360]
https://forum.mrmoneymustache.com/investor-alley/invest-lump-sum-or-wait/
11/2020 [3585]
https://forum.mrmoneymustache.com/investor-alley/little-reminder-just-how-gross-the-valuation-of-equities-is/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-terrified-of-stock-market-right-now/
12/2020 [3703]
https://forum.mrmoneymustache.com/welcome-to-the-forum/i-pulled-my-index-funds-because-fear-of-market-crash/
2/2021 [3935]
https://forum.mrmoneymustache.com/investor-alley/beginner-question-is-it-a-good-time-to-invest-in-stock-etf-now/
3/2021 [3939]
https://forum.mrmoneymustache.com/investor-alley/sky-high-sp-500-pe-ratio/
4/2021 [4129]
https://forum.mrmoneymustache.com/investor-alley/bad-time-to-enter-large-position-into-market/
https://forum.mrmoneymustache.com/investor-alley/advice-121943/
6/2021 [4281]
https://forum.mrmoneymustache.com/ask-a-mustachian/what-to-do-with-a-windfall-122870/
8/2021 [4437]
https://forum.mrmoneymustache.com/investor-alley/the-great-marital-dispute-who-is-'right'-about-how-to-invest!/
9/2021 [4535]
https://forum.mrmoneymustache.com/investor-alley/thoughtshelp-took-crypto-profits-cash-heavy/
https://forum.mrmoneymustache.com/investor-alley/what-to-do-with-large-bonus-123900/
11/2021 [4595]
https://forum.mrmoneymustache.com/ask-a-mustachian/what-to-do-with-an-inheritance-(international)/
12/2021 [4701]
https://forum.mrmoneymustache.com/investor-alley/is-a-7-return-unlikely-without-a-complex-approach/
https://forum.mrmoneymustache.com/welcome-to-the-forum/upcoming-recession/
3/2022 [4201]
https://forum.mrmoneymustache.com/welcome-to-the-forum/what-to-do-with-$100k-126670/
5/2022 [3991]
https://forum.mrmoneymustache.com/investor-alley/where-to-stuff-this-extra-income/
6/2022 [4177]
https://forum.mrmoneymustache.com/investor-alley/safer-investment-ideas-for-8-years/
11/2022 [3945]
https://forum.mrmoneymustache.com/ask-a-mustachian/live-off-the-cash-or-invest-it-already-fire'd/
1/2023 [4020]
https://forum.mrmoneymustache.com/investor-alley/does-easy-access-to-the-market-drive-up-prices/
4/2023 [4151]
https://forum.mrmoneymustache.com/investor-alley/high-yield-savings-cds-or-money-market-fund/

Miscellaneous
https://forum.mrmoneymustache.com/investor-alley/%27but-right-now-the-market-is-at-an-all-time-high-%27/
https://forum.mrmoneymustache.com/investor-alley/the-great-market-crash-of-2016!/
https://forum.mrmoneymustache.com/investor-alley/how-to-deal-with-losing-$117k-in-stock-market/
https://forum.mrmoneymustache.com/investor-alley/so-we're-basically-on-track-for-a-bear-market-by-tomorrow/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-feeling-depressed-about-global-equities-10-year-outlook/
https://forum.mrmoneymustache.com/investor-alley/stocks-will-only-return-4-annually-for-next-decade-john-bogle/
https://forum.mrmoneymustache.com/welcome-to-the-forum/new-saver-worried-about-future-stockmarket/
https://forum.mrmoneymustache.com/investor-alley/i-tried-to-time-the-market-roast-me-and-tell-me-what-to-do-now/
https://forum.mrmoneymustache.com/investor-alley/help-i-screwed-up/
https://forum.mrmoneymustache.com/ask-a-mustachian/lost-all-my-money-in-the-stock-market-made-it-all-back-and-some-need-advice/
https://forum.mrmoneymustache.com/antimustachian-wall-of-shame-and-comedy/lessons-from-riding-the-hot-stock-train/

[Heckler]

My intention will be to eventually invest this bonus in stocks.

why stocks eventually but not now?

S&P +13.68 (0.33%)today

[Heckler]

PS, my bonus went 100% to S&P500 but I'll be sending future paychecks to low value bond etfs soon to rebalance, but also have cash in a HYSA 4.35%.  Follow your asset allocation.

Of your three options, I like #1 the best, if you are happy with the bank of choice.  Most liquid, reasonable short-term returns. 

[ChpBstrd]

We're in a weird place now where bank CDs are yielding more than many high-grade corporate and municipal bonds. That makes CDs a winner compared to their riskier and lower-yielding competitors.

E.g.
Wal-Mart AA callable bonds maturing 4/15/2026: 4.09%
FDIC-insured non-callable CD from Morgan Stanley maturing 4/13/2026: 4.51%

Of course, the SEC yield for something like VMFXX is even higher at 4.76% but that rate will rapidly go down if the market is right about there being rate cuts later this year. The ETF SGOV has a 30d yield of 4.64% and a lower ER than the Vanguard fund.

[weebs]

We're in a weird place now where bank CDs are yielding more than many high-grade corporate and municipal bonds. That makes CDs a winner compared to their riskier and lower-yielding competitors.

Indeed.  I just purchased a couple 12 month CDs at 5.15% through Vanguard using funds that were sitting in VMFXX.  The purchase locks up the vast majority of the money in my brokerage account for 12 months, but I'm cool with that.  It gives me time to come up with a meaningful IPS and limit my exposure to the market for what is shaping up to be an interesting 12 months.  My retirement accounts (50% of my total stash) are still allocated in the tradition 60/40 manner and I plan to let that ride.

[secondcor521]

I wouldn't do it because of the hassle factor, but I've seen multiple people talk about chasing bank bonuses.  If you're willing to jump through hoops, and have strong attention to detail, and are willing to do the research, you can probably beat the 4% to 5% rates on the other options mentioned in this thread so far.

[ChpBstrd]

I've shifted to liking the money market fund option over the CDs. I think we have real estate related issues coming in the 2nd half of this year, and I would not want to have too much of my money tied up for another 6 months when the bargains start appearing in stocks, preferreds, long-duration bonds, REITs, and maybe even real estate itself. What does one give up in exchange for the liquidity? A quarter-percent?

[Edubb20]

I'm not moving any of my money from existing accounts into CD's and I haven't stopped my wife and I's 401k or 457b contributions, but I did pause our brokerage contributions and  am laddering 5% 7 months cds at my credit union instead. I'll do this for as long as it stays above 5% or until a market crash, whichever happens first.  I'm super conservative and have always used 5% returns as my retirement calculation so it makes sense for me.

[weebs]

I'm not moving any of my money from existing accounts into CD's and I haven't stopped my wife and I's 401k or 457b contributions, but I did pause our brokerage contributions and  am laddering 5% 7 months cds at my credit union instead. I'll do this for as long as it stays above 5% or until a market crash, whichever happens first. 

I dig it.  That's much more flexible than the route I took.

[TexTexTex]

The financial forecasts from multiple sources I follow are not looking great, and given that rates are up, felt it was wise. My intention will be to eventually invest this bonus in stocks.

Why not put it in stocks today? Is holding cash part of your investment policy statement? I'm personally using VMFXX money market fund but that's only because I need the cash for a down payment imminently.

Spoiler: show

1/2013  [SP500 = 1462]
https://forum.mrmoneymustache.com/investor-alley/is-now-a-bad-time-to-invest-in-stock-index-funds/
5/2013  [1583]
https://forum.mrmoneymustache.com/investor-alley/starting-today!/
https://forum.mrmoneymustache.com/investor-alley/$80k-sitting-in-cash-bc-scared-of-high-flying-stock-mkt-punch-me/
10/2013  [1695]
https://forum.mrmoneymustache.com/investor-alley/stock-market-expensive-now-alternatives/
5/2014  [1884]
https://forum.mrmoneymustache.com/investor-alley/stock-market-is-high-am-i-too-late/
https://forum.mrmoneymustache.com/investor-alley/is-the-stock-market-too-expensive-to-get-back-in/
7/2014  [1973]
https://forum.mrmoneymustache.com/investor-alley/current-market-has-me-scared-to-invest/
9/2014  [2002]
https://forum.mrmoneymustache.com/investor-alley/is-it-a-good-time-to-invest-new-money/
10/2014  [1946]
https://forum.mrmoneymustache.com/ask-a-mustachian/stock-market-would-you-buy-now-or-wait/
1/2015  [2058]
https://forum.mrmoneymustache.com/investor-alley/stock-market-should-i-be-concerned/
3/2015  [2117]
https://forum.mrmoneymustache.com/investor-alley/talk-me-out-of-timing-the-australian-market/
12/2015  [2103]
https://forum.mrmoneymustache.com/ask-a-mustachian/where-to-put-a-large-windfall-with-stock-market-near-all-time-highs/
1/2016  [2013]
https://forum.mrmoneymustache.com/investor-alley/about-to-sell-everything-talk-me-off-the-ledge-(or-push-me-off)-please!/
4/2016 [2073]
https://forum.mrmoneymustache.com/investor-alley/here-it-comes-red-dow/
2/2017  [2280]
https://forum.mrmoneymustache.com/investor-alley/does-anyone-think-we-are-in-a-bubble/
4/2017  [2359]
https://forum.mrmoneymustache.com/investor-alley/top-is-in/
6/2017  [2430]
https://forum.mrmoneymustache.com/continue-the-blog-conversation/recession-coming/
8/2017  [2476]
https://forum.mrmoneymustache.com/investor-alley/getting-scared-of-stock-market/
1/2018  [2696]
https://forum.mrmoneymustache.com/investor-alley/nervous-about-the-market/
3/2018  [2678]
https://forum.mrmoneymustache.com/investor-alley/when-would-you-get-back-in/
5/2018  [2655]
https://forum.mrmoneymustache.com/investor-alley/investing-in-a-bull-market/
6/2018  [2735]
https://forum.mrmoneymustache.com/investor-alley/moving-to-cash-market-timing-can%27t-believe-it/
10/2018  [2925]
https://forum.mrmoneymustache.com/welcome-to-the-forum/sell-index-funds-now-for-down-payment-during-recession/
2/2019  [2707]
https://forum.mrmoneymustache.com/investor-alley/welp-i'm-going-to-take-a-stab-at-timing-the-market/
4/2019  [2867]
https://forum.mrmoneymustache.com/investor-alley/buy-vtsax-now-while-its-this-high-or-wait-till-a-drop/
https://forum.mrmoneymustache.com/investor-alley/how-concerned-are-you-about-the-everything-bubble/
5/2019  [2924]
https://forum.mrmoneymustache.com/ask-a-mustachian/scared-of-investing-in-the-stock-market-now/
6/2019  [2890]
https://forum.mrmoneymustache.com/uk-tax-discussion/global-index-tracker-is-so-high!-do-i-just-keep-putting-my-money-into-it-anyway/
7/2019 [3026]
https://forum.mrmoneymustache.com/investor-alley/would-you-106836/
8/2019 [2889]
https://forum.mrmoneymustache.com/investor-alley/vtsax-and-a-looming-recession/
9/2019 [2978]
https://forum.mrmoneymustache.com/investor-alley/recession-in-2-ish-years-scale-and-nature/
10/2019 [2986]
https://forum.mrmoneymustache.com/investor-alley/advice-needed-108726/
11/2019 [3110]
https://forum.mrmoneymustache.com/investor-alley/questions-from-37yr-old-that-very-recently-became-serious-about-fi/
https://forum.mrmoneymustache.com/investor-alley/where-to-invest-my-cash-now/
12/2019 [3169]
https://forum.mrmoneymustache.com/ask-a-mustachian/help!-i-dont-know-where-to-start/
https://forum.mrmoneymustache.com/investor-alley/the-old-excuses-for-down-swings-and-a-reality-yet-we-are-at-all-time-highs!/
1/2020 [3296]
https://forum.mrmoneymustache.com/investor-alley/what-to-do-with-a-large-sum-of-money-bad-time-to-buy-index-funds/
2/2020 [3345]
https://forum.mrmoneymustache.com/real-estate-and-landlording/in-a-pickle/
6/2020 [3125]
https://forum.mrmoneymustache.com/investor-alley/august-is-when-it-all-implodes/
https://forum.mrmoneymustache.com/investor-alley/should-i-move-my-bond-etf-to-money-market-fund-or-cd/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-struggling-to-not-sell/
8/2020 [3360]
https://forum.mrmoneymustache.com/investor-alley/invest-lump-sum-or-wait/
11/2020 [3585]
https://forum.mrmoneymustache.com/investor-alley/little-reminder-just-how-gross-the-valuation-of-equities-is/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-terrified-of-stock-market-right-now/
12/2020 [3703]
https://forum.mrmoneymustache.com/welcome-to-the-forum/i-pulled-my-index-funds-because-fear-of-market-crash/
2/2021 [3935]
https://forum.mrmoneymustache.com/investor-alley/beginner-question-is-it-a-good-time-to-invest-in-stock-etf-now/
3/2021 [3939]
https://forum.mrmoneymustache.com/investor-alley/sky-high-sp-500-pe-ratio/
4/2021 [4129]
https://forum.mrmoneymustache.com/investor-alley/bad-time-to-enter-large-position-into-market/
https://forum.mrmoneymustache.com/investor-alley/advice-121943/
6/2021 [4281]
https://forum.mrmoneymustache.com/ask-a-mustachian/what-to-do-with-a-windfall-122870/
8/2021 [4437]
https://forum.mrmoneymustache.com/investor-alley/the-great-marital-dispute-who-is-'right'-about-how-to-invest!/
9/2021 [4535]
https://forum.mrmoneymustache.com/investor-alley/thoughtshelp-took-crypto-profits-cash-heavy/
https://forum.mrmoneymustache.com/investor-alley/what-to-do-with-large-bonus-123900/
11/2021 [4595]
https://forum.mrmoneymustache.com/ask-a-mustachian/what-to-do-with-an-inheritance-(international)/
12/2021 [4701]
https://forum.mrmoneymustache.com/investor-alley/is-a-7-return-unlikely-without-a-complex-approach/
https://forum.mrmoneymustache.com/welcome-to-the-forum/upcoming-recession/
3/2022 [4201]
https://forum.mrmoneymustache.com/welcome-to-the-forum/what-to-do-with-$100k-126670/
5/2022 [3991]
https://forum.mrmoneymustache.com/investor-alley/where-to-stuff-this-extra-income/
6/2022 [4177]
https://forum.mrmoneymustache.com/investor-alley/safer-investment-ideas-for-8-years/
11/2022 [3945]
https://forum.mrmoneymustache.com/ask-a-mustachian/live-off-the-cash-or-invest-it-already-fire'd/
1/2023 [4020]
https://forum.mrmoneymustache.com/investor-alley/does-easy-access-to-the-market-drive-up-prices/
4/2023 [4151]
https://forum.mrmoneymustache.com/investor-alley/high-yield-savings-cds-or-money-market-fund/

Miscellaneous
https://forum.mrmoneymustache.com/investor-alley/%27but-right-now-the-market-is-at-an-all-time-high-%27/
https://forum.mrmoneymustache.com/investor-alley/the-great-market-crash-of-2016!/
https://forum.mrmoneymustache.com/investor-alley/how-to-deal-with-losing-$117k-in-stock-market/
https://forum.mrmoneymustache.com/investor-alley/so-we're-basically-on-track-for-a-bear-market-by-tomorrow/
https://forum.mrmoneymustache.com/investor-alley/anyone-else-feeling-depressed-about-global-equities-10-year-outlook/
https://forum.mrmoneymustache.com/investor-alley/stocks-will-only-return-4-annually-for-next-decade-john-bogle/
https://forum.mrmoneymustache.com/welcome-to-the-forum/new-saver-worried-about-future-stockmarket/
https://forum.mrmoneymustache.com/investor-alley/i-tried-to-time-the-market-roast-me-and-tell-me-what-to-do-now/
https://forum.mrmoneymustache.com/investor-alley/help-i-screwed-up/
https://forum.mrmoneymustache.com/ask-a-mustachian/lost-all-my-money-in-the-stock-market-made-it-all-back-and-some-need-advice/
https://forum.mrmoneymustache.com/antimustachian-wall-of-shame-and-comedy/lessons-from-riding-the-hot-stock-train/

I was actually debating purchasing my first home within the next 12-18 months. I'm very unsure at this point, given the real estate market, and the recent changes in my personal life. May relocate in the near future (WFH), so the idea of buying a house has decreased dramatically until I can identify what my next few years look like (geographically). Flexibility and mobility may be more of an asset than equity in a home at this point.



Also thank you to everyone responding.

[jinga nation]

Wife saw that NASA FCU is offering a 9-month CD at 5.65% APY.

However, their low liquidity rating doesn't give me confidence to deposit with them. I know, FDIC and all that, but in light of recent events, do I want to deal with a chance of hassle later on?

Perhaps better to keep funds liquid in Vanguard VMFXX currently yielding 5.04%?

Oops. Realized my answer might not be relevant to OP's question.