FINDING THE HIGHEST YIELDS ON SAFE MONEY

07/06/1999

Please accept my abject apology for failing to discuss the five stocks sure to double before Labor Day.

Instead, we're going to deal with a pedestrian subject: what you can earn on your nervous money, the stuff you don't want to risk. The sorry truth is that millions of Americans regularly ignore opportunities to earn more on their money simply because they don't know where to look.

Here's an example. Suppose you live in the Northeast, have a CD about to mature, and want to know where you can get a good yield.

If you are a creature of habit, you'll go to the corner bank and get an average annualized yield of 4.57 percent on a five-year CD.

Not a good choice.

Why?

Because it turns out that certificates of deposit are a bit like wines -- some regions have better offerings than others. And some regions just don't have good offerings at all.

You won't find good CD yields, at ANY maturity, in the Northeast. But if you happen to live in the Southeast and are a creature of habit, you'll get above-average yields on maturities of one year or longer. If you live in the West, you'll get above-average yields on three- and six-month CDs.

But that isn't your only choice. Another option -- one mentioned frequently in this column -- is to invest in a five-year U.S. Treasury note. In the current market, this will increase your yield to 5.91 percent. That's more than a full percentage point over typical CDs. (These yields are compared every week on my Web site at www.scottburns.com/wwbanker.htm.)

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That isn't the end of it.

Brokerage firms also distribute CDs. They are as fully insured as the CDs at your corner bank. The typical yield on a five-year, broker-distributed CD is about 6.08 percent.

Finally, you can search for the highest-yielding CD anywhere in the country. Recently, the best yield on a five-year CD was 6.66 percent on a $5,000 minimum deposit at Keybank (telephone 800-872-5553). In other words, some careful shopping can get you a five-year CD rate that's better than 30-year government bonds.

All this information can be found on one Web site, www.banxquote.com.

Source

3 Months

6 Months

1 Year

2 Years

5 years

Top CD

5.13%

5.41%

5.96%

6.20%

6.66%

Avg. Brokered CD

4.96%

5.15%

5.46%

5.69%

6.08%

Comparable Treasury Obligation

4.72%

5.04%

5.16%

5.72%

5.91%

Highest Regional CD

3.84% (W)

4.10% (W)

4.36% (SE)

4.61% (SE)

4.82% (SE)

National Average CD

3.62%

4.06%

4.28%

4.44%

4.66%

Lowest Regional CD

3.44% (NE)

3.96% (NE)

4.17% (NE)

4.34% (NE)

4.57% (NE)

Source: www.banxquote.com, June 24, 1999; SE (Southeast), NE (Northeast); W (West)

Now let's do a little exercise to see what this all comes down to in dollars and cents. Suppose you have $10,000 to invest. If you buy a typical CD in the Northeast, your annual interest income will be $457. Shop and get the top-yielding CD in the country, and you'll get $666 a year, a difference of $209. Repeat that for the five-year life of the investment and some careful shopping has a payoff of $1,045 in additional income.

Source

1 Year

5 Years

Top CD

$666

$3,330

Avg. Brokered CD

$608

$3,040

Comparable Treasury Obligation

$591

$2,955

Highest Regional CD

$482

$410

National Average CD

$466

$2,330

Lowest Regional CD

$457

$2,285

Source: www.banxquote.com, June 24, 1999

An additional $209 a year from a safe investment gets my attention.

One reason: You don't need as much in savings. After all, to get the same income as $10,000 in a top-yielding CD, you'd need to put $14,292 in an average CD, or $14,573 in a CD from the Northeast.

Then again, you'd need to invest a whopping $55,500 in a portfolio of average stocks to produce the same income ... but that's another story.

(Questions about personal finance and investments may be sent to: Scott Burns, The Dallas Morning News, P.O. Box 655237, Dallas 75265; or faxed to (214) 977-8776; e-mail to scott@scottburns.com Check the Web site: "www.scottburns.com." Questions of general interest will be answered in future columns.)


 
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