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

--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.