The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: petra on April 03, 2017, 05:23:00 AM
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Hi,
Would you recommend to invest in 3.4% fixed interest rate (CD)? Money would be tied for 6 years.
I was thinking to diversify my portfolio and put up to 10% of my yearly contribution inside.
What do you think, should I go for it or keep adding to index funds.
Thanks
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Only you can answer that.
I personally wouldn't but I have a higher risk tolerance, I'm viewing my timeline over the course of 50 years, and I have an Investment Policy Statement which I follow and review. That IPS guides my investment decisions.
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I am not aware of any six year CD's that pay 3.4 percent. Are you sure this is a CD issued by a bank insured by the FDIC?
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Sorry, I'm from EU. It is a type of investment similar to CD with gov. help...
Yes it is insured by state. 3.4% is interest rate, and I would be limited to ~5k per year. My other savings goes to 3fund portfolio.
Considering that my 3fund portfolio is in USD, I was thinking to add this as diversification (fixed interest) and currency risk (it is in EURO).
Overall for next 20 years I would gain more from funds, even taking currency risk into account, but 3.4% fixed in not too bad, however not even close to potential 7%+ from funds.
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Only you can answer that.
http://canadiancouchpotato.com/2010/11/10/ready-willing-and-able-to-take-risk/
This can help you answer that.
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It might be worth considering if you are over age 65 or so, or if you can't stand volatility. If you are not yet retired, I think the interest rate is too low. Personally, I would borrow all the money I could at that rate and invest it in higher yielding things.