Cadencenextone1

Does it make sense to break CD 12 months before maturity?

Have 200k in synchrony bank's 5yr CD that matures in 12months. 2.25% APY. Was planning to move it to vtsax. Penalty to break CD is 6 month interest. It seems as long as vtsax pays 3.375%+ over next 1 yr it'd be advantageous to break CD. Is vtsax 7% yield safe to assume? Anyone done this? Is it worth to break CD? (Fixed the penalty) #stock #vtsax #CD

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Amazon Blin$Ninja Jan 1, 2020

Nah, just wait

Cadence nextone1 OP Jan 1, 2020

What reason?

Apple 2.70|10:1 Jan 1, 2020

Invest 200k over 90 days Never buy in a single transaction Also do it after January (google it why post jan)

Cadence nextone1 OP Jan 1, 2020

You're referring to "january effect"? Why over 90 days not single?

Microsoft HINs46 Jan 1, 2020

Doesn't January effect make it better to buy in early January aka now?

Microsoft Hrgf72 Jan 1, 2020

How is VTSAX safe?! Sorry, but you are either trolling or have absolutely no idea of how the stock market works. If the latter, invest $10k to watch what happens and read about mutual funds, ETFs and other investment products ASAP.

Cadence nextone1 OP Jan 1, 2020

Not trolling. New to money matters. All i heard on here and elsewhere is vtsax is the best to invest in stocks and long term yield has been consistent above 7%.

Microsoft Hrgf72 Jan 1, 2020

Okay then. Just put VTSAX in Google and see the chart. Select 5Y or All and see the price fluctuation. Basically, as with any investment, you may lose principal (meaning at the end of the year end up with significantly less than your original $200k instead of getting any interest). Depending on when you think you need the money you may or may not want to take this risk. To be very clear, I don't advise you completely against investing in stocks. It is a good idea to invest. But make sure you keep enough cash to buy whatever you might need within 1-2 years in case the market tanks and your investment loses 20%+ of its principal.

TripAdvisor zslc33 Jan 1, 2020

Why u wanna buy it at all time high

Apple 2.70|10:1 Jan 1, 2020

This!!. People keep saying time out of market beats timing market. Just think had you invested during 15-20% downtime of dec2018, you would be 40% up as of now. I am not saying you will be able to time the market at the exact moment, just invest overtime or wait for few bad days in a row. This is not the right time to add any money into the market.

Facebook vacaymode🏝 Jan 1, 2020

Yeah let’s just dump everything into vtsax when stocks are trading at all time highs. Fomo is real.

H&R Block Olve60 Jan 1, 2020

Yah specially for a person who was stuck in CD for 5 years getting a lousy return compared to what the market did

Google bighead2 Jan 1, 2020

I'd prob just leave it at this point. To frame things differently, I wouldn't take a loan at 4.5% in order to invest in VTSAX. But I wouldn't think you're crazy either way.

Cisco VKFU58 Jan 1, 2020

Yes a CD is a mistake and poor place to keep it even with penalty. As long as your intention is to leave the 200k invested over the next couple years or longer it would be well worth breaking the CD now and putting it into VTSAX. Personally however I would actually split it and put 100k in VTSAX (vanguard total stock market admiral) and the other 100k in VFIAX (vanguard S&P 500 admiral).

Google bighead2 Jan 1, 2020

Holding both VFIAX and VTSAX will make you less diversified than holding VTSAX on its own.

Cadence nextone1 OP Jan 4, 2020

why it makes less diversified?

Cadence nextone1 OP Jan 4, 2020

If you look at vtsax in its worst, what you'd probably pick is the case of someone buying it at peak on oct 2007 (price 37.5) and selling right before recent years rally in june 2015 (price 52). Thats 1.45X up in 8 yrs = 4.3% APY. So even in the worst case scenario for long term 4.3% is not bad.

Microsoft Hrgf72 Jan 5, 2020

It is definitely not the worst period. Moreover, in your example you assume you somehow weren't laid off in 2009 and didn't need any of the money for over 8 years.

Cadence nextone1 OP Jan 5, 2020

It is an example of a reasonable counterpoint. What you seem to suggest is absolute extreme case, almost irrelevant. Ofc there is risk w any investment.