CDs and MMAs
Shop for high-yield CDs.
Many banks are advertising CD yields that are well above those of traditional CDs. Add a few high-yielding CDs to your portfolio and you could see some nice returns in this dismal environment.
There are approximately 20 banks offering one-year CDs with yields of 4 percent or better on Bankrate's high-yield database.
Wachovia, and several other banks, are paying more than 5 percent on five-year CDs.
"I think you'll see good yields on the longer end of the yield curve for a while," says Larry Fuschino, director of savings deposits at Wachovia. "I think all banks have realized that now is the time to try to lock in as many customers as possible to somewhat of a term situation, so we're seeing a lot more competition than we saw even a month ago."
Since Washington Mutual just went belly up, it's a good time to point out that you must stay within FDIC limits if you want all of your deposits insured. WaMU customers who were over the limit lucked out because JP Morgan Chase accepted the uninsured deposits, but don't count on that being the situation all the time.
If you want to keep your money liquid, check out Bankrate's listing of high-yield money market accounts, some of which are paying more than 3.5 percent.
Take-away
Do some homework before buying a CD.
If the Fed sees the need to cut rates again it will get tougher and tougher to find decent rates. Even banks that need money will be able to lower their rates. Stick with maturities that meet your cash needs and your risk tolerance.
Tired of managing your own portfolio? Consider using a Certified Financial Planner.
-- Laura Bruce