High-Yield Savings Account
Given ~2% is barely above inflation, what APR would it take to make a high-yield savings account interesting to you? Second question: What’s the next best option to generate low-to-no risk cash flow? Municipal Bonds? Renting? Lending DAI?
S/He gonna pitch that in his/her company
Yes, I’ll pitch the CEO, “raise the interest rate.” Brilliant, @infstone.
cash was the best asset of 2018
That’s true: Cash out performed the market’s -6% return in 2018, but that’s not generally the case, and it’s never been the case over 10+ year time horizons.
Past performance does not guarantee future returns.
2% is current market rate for savings account. Good enough for me.
Can you share what banks in bay area (or online ones) currently offering FIDC insured 2% savings accounts?
@WscU36 - You’ll have to go to a FinTech company like Robinhood, Betterment, Wealthfront, or Credit Karma to get 2%. Chase and Wells Fargo literally offer 0.01%. I’m not recommending one FinTech in particular; I have a conflict of interest. ;)
2% APR savings A/C is already interesting for my investments that warrant negligible risk.
Marcus (Goldman Sachs) and Amex both have 1.9% rates right now.
That’s certainly within the margin of error!
Wealthfront at 2.07
If you’re in a high tax state/high tax bracket, state-appropriate Vanguard muni money market funds strictly dominate savings accounts. Taxes turn 2% in a regular savings account into 1% right off the bat; with muni money markets, you currently get around 1.3% but get to keep all of it. Savings accounts have limits on the number of monthly transactions, muni MMs don’t. I’m not saying the returns are particularly exciting either way, but cash has to sit somewhere. Longer duration muni bond funds are certainly a very easy way to generate low-to-no risk cash flow at longer horizons. Renting or lending are much more high-touch and the risks are considerably lumpier (especially with renting, which is hard to diversify). I get my renting kick with a Vanguard REIT in a tax-deferred account.
Thanks, @WXia81, this is very interesting. Thanks for taking the time to put together such a detailed answer. I learned about Vanguard REIT and I ended up finding some interesting high yield municipal bond mutual funds. I don’t expect to have to pay any taxes on my 2% high yield savings account however. There must be some threshold where I don’t have to report the three-figure (max) gains...
There is no de-minimis exception when it comes to reporting ordinary interest income, and it gets taxed as regular income. You get a 1099-INT, the numbers get reported to the IRS, the IRS sees the difference and doesn’t care where it comes from when it sends you the automated audit form.
Wait, YOU'RE asking US?!
You! Yes YOU in particular. Thoughts?
Well, I'm former NerdWallet, so you wouldn't be interested. ☺️