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Hi. I recently opened an IRA with Scottrade. Now, I was pretty
disappointed with the selection of financial products. The only fixed
income products (bond funds don't count--they float) are $10K minimum
CDs with a minimum of 1 year terms. They give 0.2% on all of your
cash holdings (which is basically nothing). I want something with a
reasonable rate of return without a time limit that I can put my money
in while I am waiting to invest it. 2.X% is fine or even high 1.X% as
long as I can take it out to trade when I want to (I have a Money
Market Account with a bank that I get 2.75% on). I called up their
customer service. The guy told me that since they aren't a bank, they
can't offer those sorts of products. That seemed like a BS answer to
me since they could loan that money to banks. He did however say that
if there are any products out there that I would like to see, I just
had to give him a CUSIP number (whatever that is) and they would add
that product.
So my question is this: does anyone know of any fixed income (i.e.
interest bearing) financial products whose CUSIPs I could give to
them.
If I can't get this fixed, I'll have to switch to a different IRA
provider. Any recommendations there? Low trading fees are important,
too.
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On Jun 27, 1:59 pm, kramer31 <k...@g...com> wrote:
> Hi. I recently opened an IRA with Scottrade. Now, I was pretty
> disappointed with the selection of financial products. The only fixed
> income products (bond funds don't count--they float) are $10K minimum
> CDs with a minimum of 1 year terms. They give 0.2% on all of your
> cash holdings (which is basically nothing). I want something with a
> reasonable rate of return without a time limit that I can put my money
> in while I am waiting to invest it. 2.X% is fine or even high 1.X% as
> long as I can take it out to trade when I want to (I have a Money
> Market Account with a bank that I get 2.75% on). I called up their
> customer service. The guy told me that since they aren't a bank, they
> can't offer those sorts of products. That seemed like a BS answer to
> me since they could loan that money to banks. He did however say that
> if there are any products out there that I would like to see, I just
> had to give him a CUSIP number (whatever that is) and they would add
> that product.
>
> So my question is this: does anyone know of any fixed income (i.e.
> interest bearing) financial products whose CUSIPs I could give to
> them.
>
> If I can't get this fixed, I'll have to switch to a different IRA
> provider. Any recommendations there? Low trading fees are important,
> too.
>
You are not likely to get higher interest rates with your
requirement. You want low trading fee and high interest rates, sure,
we all want that. I too have money market accts that pay higher, but
not from inside an IRA.
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PeterL wrote:
> You are not likely to get higher interest rates with your
> requirement. You want low trading fee and high interest rates, sure,
> we all want that. I too have money market accts that pay higher, but
> not from inside an IRA.
My E-Trade IRAs have a choice of money market funds. But the interest
rate varies so that doesn't necessarily meet the OP's requirement.
-Will
william dot trice at ngc dot com
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On Jun 27, 1:59 pm, kramer31 <k...@g...com> wrote:
> 2.X% is fine or even high 1.X% as
>> long as I can take it out to trade when I want to (I have a Money
>> Market Account with a bank that I get 2.75% on). I
>> If I can't get this fixed, I'll have to switch to a different IRA
>> provider. Any recommendations there? Low trading fees are important,
>> too.
E*Trade Bank is currently paying 3.15% on demand deposits. I assume they'll let
you open an IRA account. -- Doug
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kramer31 wrote:
> Hi. I recently opened an IRA with Scottrade. They give 0.2% on
> cash holdings (which is basically nothing). I want something with a
> reasonable rate of return without a time limit that I can put my money
> in while I am waiting to invest it.
The scenario you're describing is the reason I suggest that people look
closely at money-market rates when choosing a discount broker. Saving a
couple bucks per trade may be nothing compared to the "lost income" from
a chronically lousy MM rate.
A money-market fund would meet your criteria of "no time limit", and
that's a common way to get a better rate - use something other than the
"default" sweep fund. But it's a hassle and could introduce other costs.
When you want to buy another investment, you'd need to sell enough of
the money-market fund to provide the needed cash to settle your trade.
For some MM funds, there's a minimum trade in & out of the fund. And
each trade in and out might trigger a ticket charge. As an example,
Vanguard's money-market funds are likely to be "non-NTF" meaning you pay
a trade fee every time you buy or sell them. If the ticket fee is say
$10 in both directions that might eat up the rate advantage. Check that
though - review Scottrade's list of NTF (no transaction fee)
money-market funds to see if any have good rates.
As others have suggested the easiest answer may be simply using another
IRA custodian. If enough people head for the doors because of lousy MM
rates, perhaps the brokerage firms will pay better rates. Before you do
so, call and ask -- TD Ameritrade had a not-so-advertised better fund
available for IRAs that they pulled out of their pocket when I called
and said "I'm yanking my accounts, what are you doing to do about it?"
-Tad
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On Jul 2, 10:48 am, TB <b...@p...net> wrote:
> kramer31 wrote:
> > Hi. I recently opened an IRA with Scottrade. They give 0.2% on
> > cash holdings (which is basically nothing). I want something with a
> > reasonable rate of return without a time limit that I can put my money
> > in while I am waiting to invest it.
>
> The scenario you're describing is the reason I suggest that people look
> closely at money-market rates when choosing a discount broker. Saving a
> couple bucks per trade may be nothing compared to the "lost income" from
> a chronically lousy MM rate.
Amen to that! When account balances get into the 100k+ range, trading
charges constitute fractions of a percent of the account balance. Yet,
because the fees are up front and clearly shown on statements, people
often throw a tantrum. Unless you're doing a lot of trading, there are
simply too many other concerns that carry far greater weight (like
money market rates).
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On Jul 2, 1:01 pm, kastnna <k...@a...org> wrote:
> On Jul 2, 10:48 am, TB <b...@p...net> wrote:
>
> > kramer31 wrote:
> > > Hi. I recently opened an IRA with Scottrade. They give 0.2% on
> > > cash holdings (which is basically nothing). I want something with a
> > > reasonable rate of return without a time limit that I can put my money
> > > in while I am waiting to invest it.
>
> > The scenario you're describing is the reason I suggest that people look
> > closely at money-market rates when choosing a discount broker. Saving a
> > couple bucks per trade may be nothing compared to the "lost income" from
> > a chronically lousy MM rate.
>
> Amen to that! When account balances get into the 100k+ range, trading
> charges constitute fractions of a percent of the account balance. Yet,
> because the fees are up front and clearly shown on statements, people
> often throw a tantrum. Unless you're doing a lot of trading, there are
> simply too many other concerns that carry far greater weight (like
> money market rates).
Discount brokerage firms catering to active traders often pay low
interest on cash balances. At least for a taxable account, it's useful
to have more than one broker and to sweep cash using ACH to the
brokerage that has better interest rates.
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b...@a...com wrote:
> Discount brokerage firms catering to active traders often pay low
> interest on cash balances.
There's a "follow the money" answer too...when you see brokerage firms
report their income recently, their ability to borrow on the cheap and
lend at higher rates, has been keeping the numbers up. Example, Schwab's
Q1-2008 income statement, where they break income down by segment...
http://tinyurl.com/3tvast
Interest revenue, $510 million, interest expense $91 million - good
business to be in! Total profit for the quarter was just $305 million.
Trading revenue (not income, just revenue) was only $246 million.
Point being, trading commissions are a bit like the loss-leader at a
supermarket, the $1.99/gallon milk that gets you in the door. It's not
how most brokerage firms really make their money, and the ways they do
make money have to come out of account holders' pockets - such as low MM
rates on core cash balances. As B pointed out a low MM rate might be
tied to low commissions, for active traders who don't care because they
don't keep much in cash...but if you do, you might look for a firm with
higher commission but better MM rates.
-Tad
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> For some MM funds, there's a minimum trade in & out of the fund. And
> each trade in and out might trigger a ticket charge. As an example,
> Vanguard's money-market funds are likely to be "non-NTF" meaning you pay
> a trade fee every time you buy or sell them.
Not so.
I have a Vanguard money market fund in my taxable account. When I want
to buy any other fund, it is a simple matter to "exchange" shares in
money market fund for shares in any other Vanguard fund. There is no fee
to make the exchange and the trade is accomplished quickly.
Sounds like the original poster wants to be able to park some cash
somewhere earning a decent return, yet still have it available to make
quick purchases for his tax advantaged account. As others have noted,
the discount brokers don't make this easy. But Vanguard's money market
funds all offer competitive yields and the ability to exchange into
other Vanguard funds with no transaction fee.
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