vania-janet/multiturn-rag-retrieval-data huggingface dataset:
In addition to the other answers, also consider this: Federal bond interest rates are nowhere near the rates you mentioned for short term bonds. They are less than 1% unless you're talking about terms of 5-10 years, and the rates you mentioned are for 10 to 30-years terms. Dealer financed car loans are usually 2-5 years (the shorter the term - the lower the rate). In addition, as said by others, you pay more than just the interest if you take a car loan from the dealer directly. But your question is also valid for banks.
I get teh flight to quality arguement aka best of the dirty shirts philosophy, but I am talking realistically. And of course a 3% 10yr is worth more on the seconday market now that rates are at 1.65%.  That doesn't mean you buy the 1.65%
"How do treasury auctions work? First, the US government will issue a notice indicating how much money it would like to borrow. Below is an actual announcement issued by the treasury department that it will be having an auction to raise $23 billion. The announcement indicates the date of the auction (March 8th, 2011 in the example) as well as deadlines for competitive (11:30 AM) and noncompetitive (11:00 AM) bids. If you would like to participate in the auction then your bids must be submitted before these times. Competitive Bid - the bidder specifies the maximum price they will pay for the security. All treasuries are priced in $100 so bids are submitted in terms of buying a security that will repay the owner $100 when the security matures ($100 is the face or par value). Noncompetitive Bid - the bidder does not specify any maximum price requirement. These bidders are first in line to be issued a bill but they will get whatever price is determined at auction. There is a limit of $5 million that can be submitted as a noncompetitive bid per bidder per auction. For competitive bids any one customer can be awarded a maximum of 35% of the total offering. In order to better illustrate the mechanics of the auction let's go back to the example. The table below is a hypothetical list of bids for the $23 billion being issued. The bids include the total amount the bidder is willing to purchase as well as the maximum price the bidder will pay based on a $100 par value note. Bid 1: $5 billion, max price: don't care (noncompete) Bid 2: $10 billion, max price: don't care (noncompete) Bid 3: $5 billion, max price: $98 Bid 4: $5 billion, max price: $95 Bid 5: $10 billion, max price: $92 Bid 6: $5 billion, max price: $90 Notice there is a total of $40 billion in bids. The auction is only for $23 billion. This means some bids will go unfilled. The ratio between bids and the amount of the auction is called the bid-to-cover ration.
I assume you're looking for advice, not an actual guaranteed-to-appreciate answer, yes? If you believe Treasury bonds will increase as fast as inflation, that may be the way to go.
Since you are looking at preserving the principal, I would recommend laddered CDs and short term treasuries (TIPs/iBonds)
Your goals are mutually exclusive.  You cannot both earn a return that will outpace inflation while simultaneously having zero-risk of losing money, at least not in the 2011 market. In 2008, a 5+% CD would have been a good choice. Here's a potential compromise... sacrifice some immediate liquidity for more earnings. Say you had $10,000 saved: In this scheme, you've diversified a little bit, have access to 50% of your money immediately (either through online transfer or bringing your bonds to a teller), have an implicit US government guarantee for 50% of your money and low risk for the rest, and get inflation protection for 75% of your money.
I recommend you two things: I like these investments because they are not high risk. I hope this helps.
Being in the same situation, and considering that money doesn't need to be available until 2025, I just buy stocks. I plan to progressively switch to safer options as time passes.
You are a saver, not an investor.  Your time period is simply too short.  You are stuck putting your money into less productive, but safe savings accounts.
If you are looking for an index index fund, I know vanguard offers their Star fund which invests in 11 other funds of theirs and is diversified across stocks, bonds, and short term investments.
Short term investments, treasuries, current accounts.
Firstly well done on building a really sold base of savings. An emergency fund needs to have two key characteristics: Be enough to get you through a typical emergency event (often seen as approx. ~6 months’ salary in your style of situation assuming you have no dependents etc) Be liquid and available to you instantly if an emergency arises Once you have decided how much you will need for 1), you then generally find the best interest available on an instant access savings account and leave it there. It's important to note that because you need it very liquid and very secure you will basically never make (nor should  you expect to make) any sizeable rate of interest on your emergency fund. Once this is done, whatever left should be invested in an asset/mix of assets that best fit your risk profile - of which long term bonds are a completely legitimate option, but it's hard to say without knowing more about your long term aims/liabilities/job market etc.
If such an investment existed, then why would the banks be parking their overnight funds with the Federal Reserve at an interest rate of pretty much nothing?
"Edited answer, given that I didn't address the emergency fund aspect originally: None. You've said you don't feel comfortable locking it away where you wouldn't be able to get to it in an emergency. If you don't like locking it away, the answer to ""How much money should I lock up in my savings account?"" is none. On a more personal note, the interest rates on bonds are just awful. Over five years, you can do better."
It depends solely on the risk your willing to take. For example, few years back one of the leading banks in my country was offering 25% interest rate for 5 year fixed deposits and the lending rate in the market was around 12%. So people borrowed money from other banks and invested in the high return fixed deposits. After 6 months the bank filed for bankruptcy and people lost their money. Later investigations revealed that abnormal high return was offered because the bank had a major liquidity problem. So all depends on the risk associated with return on your investment. Higher the risk, higher the return.
Another option if you want a higher return is to tier your emergency fund so you are putting a portion in different savings vehicles, each with varying risk and rates of return. One option might be  You will need to assess the risk of these vehicles to see if it fits within your tolerance. If not, just using the online savings account is a fine choice. One final note regarding I-bonds - they can't be cashed out until 1 year after you buy them. This may be too limiting to some depending on their perceived need for their emergency fund over the next year; others may be more comfortable with it.
Never invest money you need in the short term. As already suggested, park your money in CDs.
Put them in Cds.  Better than a savings account, you won't lose capital unlike the stock market.
CDs pay less than the going rate so that the banks can earn money. Investing is risky right now due to the inaction of the Fed.  Try your independent life insurance agent. You could get endowment life insurance. It would pay out at age 21. If you decide to invest it yourself try to buy a stable equity fund. My 'bedrock' fund is PGF.  It pays dividends each month and is currently yealding 5.5% per year. Scottrade has a facility to automatically reinvest the dividend each month at no commission.  http://www.marketwatch.com/investing/Fund/PGF?CountryCode=US
I believe you are talking about Public Provident Fund and National Savings Certificate schemes in India. PPF -> Deposit money -> If you want to take a loan after 3 years, you can take out 25% of the balance in your PPF account. NSC -> Money locked for 6 years and can only be encashed after 3 years, you cancel your deposit and encash all your money. Money is safe in both cases, because they are secured by the Indian government. But interest(8.75% at present for both in 2014-15 financial year) is compunded anually for PPF, but half yearly for NSC. So you get a higher interest rate in case of NSC. So if you can lock in your money, without any need for withdrawls, choose a NSC for higher returns. Tax rebate wise, both are same.
Possibly you could use it as a hedging instrument if it's correlated in some way with another asset you're holding.  Even though it seems you're losing money with such a bond, that loss might be less than the hedging costs associated with other instruments.
"As a great man once said, ""No risk it, no biscuit.""  Nothing can immunize you from catastrophe. But cash won't do well in a war, either, so you need to turn it into something else.  And timing is a crapshoot. When you enter, when you exit, total waste of your energy. Find something you want to own and watch, and get wet.  If you want to be diversified, get into index funds. You'll technically own a little of everything, and they do well if you just leave them be. For example, they're higher than they were at the start of every war in the past. If you don't need the money in the war, just leave it there and you'll come out later with more than you started with which is what you wanted.  Stay away from bonds, because the Fed is going to start unwinding QE soon and that's going to clobber bond values, taking bond funds with them.  If you feel totally convinced war is coming, then get something that exposes you to gold. Like gold, for instance."
"First off, you generally want to park your emergency fund somewhere that is ""safe"", meaning something that is not subject to market fluctuations. Your emergency fund is something you need to be able to count on when times are tough! That rules out things like stock market investments. Secondly, you need to think about how quickly you will need access to the money. If you have an emergency, odds are you don't want to be waiting around for weeks/months/years for the money to become available. This rules out most fixed-term investments (Bonds, traditional CDs, etc). If you are concerned that you will need near-instant access to your emergency money, then you probably want to keep it in a Savings or Money Market Account at the same bank as your checking account. Most banks will let you transfer money between local accounts instantly. Unfortunately, your local bank probably has pitiful interest rates for the Savings/MMA, far below the inflation rate. This means your money will slowly lose value over time. Be prepared to keep contributing to it! For most people, being able to draw the cash from your fund within a few days (<1 week) is sufficient. Worst case, you charge something on your credit card, and then pay down the card when the emergency fund withdrawal arrives. If ""money within a few days"" is okay for you, there are a few options: Money Market (Mutual) Funds (not to be confused with a Money Market Account) - This is the traditional place to keep an emergency fund. These are investment funds you can buy with a brokerage account. An example of such a fund would be Fidelity Cash Reserves. MMFs are not FDIC insured, so they are not exactly zero risk. However, they are considered extremely safe. They almost never go down in value (only a few times in the past few decades), and when they have, the fund manager or the Federal Govt stepped in to restore the value. They usually offer slightly better return than a local savings account, and are available in taxable and non-taxable varieties. Online High-Yield Savings or Money Market Account - These are a relatively new invention. It's basically a the same thing as what your local bank offers, but it's online-only.
It is my understanding that banks pay less than the going rate on savings accounts and require that the person who takes out a loan pay more than the going rate. That is how the bank gets its money.  Usually the going rate is affected by the current inflation rate (but that has not been true for the last few weeks). So that means that, typically, the money you have in the bank is, gradually, losing purchasing power as the bank typically pays you less than the inflation rate.  So if you want your money to keep pace with inflation (or do a bit better) then you should buy bonds.
You can put it in a CD, or use a CD investment service like http://www.jumbocdinvestments.com/ (no affiliation).
"With every caveat that Rick said plus many many more lets have some fun.  One common way to measure risk is volatility of returns roughly how much the value of your asset jumps around.  Interestingly, the following ordering is fairly similar for many other common measures of risk. The first three on the list would be mostly interchangeable.  Generally, putting your money in ""cash"" investments has no real day-to-day price variability and the main risk is that the bank won't give you your money back at the end.  Money market funds are last as they can ""Break the buck"". To get a feel for the next few on the list I'm using previous 360 day volatility numbers for representative broad indices (asof 2014-10-27).  While these volatility values can move around quite a bit, the order is actually remarkably stable. Hedge funds might seem out of place here, but remember that hedge funds can hold be long and short at the same time and this can cancel out daily variation.  However, Hedge funds do have plenty of risks that may not be well accounted for by this measure.   For derivatives I'll refer to back to Rick's answer. This is a measure for broad investment in these categories your particular investment in Long-term Capital Management or Argentine Bonds may vary. It is important to note that your return on your investment generally grows as you go toward more risky investments down this list as people generally expect to be rewarded  in the long term for risky investments."
I am understanding the OP to mean that this is for an emergency fund savings account meant to cover 3 to 6 months of living expenses, not a 3-6 month investment horizon. Assuming this is the case, I would recommend keeping these funds in a Money Market account and not in an investment-grade bond fund for three reasons:
Banks' savings interest is ridiculous, has always been, compared to other investment options. But there's a reason for that: its safe. You will get your money back, and the interest on it, as long as you're within the FDIC insurance limits. If you want to get more returns - you've got to take more risks. For example, that a locality you're borrowing money to will default. Has happened before, a whole county defaulted. But if you understand the risks - your calculations are correct.
No no no, the stock market is always going up, so OP just needs to lever up by writing a bunch of put options on the S&amp;P 500. I mean it hasn't had a serious drop in like a year, it's basically free money, right?  (But seriously, OP, 100% safe 4% returns are unrealistic unless you're an arbitrage genius).
In the UK I believe the first £50,000 in each bank are secured by the government, so are very safe but one has to check what 'each bank' means as some are members of the same 'group'. See the FSCS
If I have $100 and put it under the bed it will return 0%.  Relatively good in a bear market and relatively bad in a bull market.
Significantly less effort to buy into any of several international bond index funds. Off the top of my head, VTIBX.
This is literally the thought process that caused the 2008 collapse, the only difference being the bonds consisted of sub-prime mortgages. Not saying its a bad idea, honestly you could make a lot of money, but macro-economically its a shit-storm brewing in the distance.
During my time in the UK I've never seen saving bonds or other term deposit accounts that were not denominated in GBP. The obvious downside of converting the money into GBP would be that you're adding currency risk to the whole scenario. If the EUR appreciates against the GBP, you'll have to make up for that too, just to keep your nominal capital intact.
&gt; Right to all of that but don't they still need US Treasuries to keep their currency competitive? Even   The Fed is not the only one who can do QE song and dance. Everybody can print money, its not a terribly hard concept.
You won't know what the exchange rate will be when you convert AUD back to USD when you eventually want to spend your money unless you hedge. the movement in fx rates could easily outweigh any benefit received from higher interest.  As far as i am aware the way the hedge is constructed you will lose any benefit from foreign interest.  That being said, the 'Carry Trade' is big business. There are plenty of people that borrow yen to invest in AUD.
"Others have mentioned the exchange rate, but this can play out in various ways. One thing we've seen since the ""Brexit"" vote is that the GBP/USD has fallen dramatically, but the value of the FTSE has gone up. This is partly due to many the companies listed there operating largely outside the UK, so their value is more linked to the dollar than the pound. It can definitely make sense to invest in stocks in a country more stable than your own, if feasible and not too expensive. Some years ago I took the 50/50 UK/US option for my (UK) pension, and it's worked out very well so far."
"Keep in mind this is an opinion piece. The Foreign Sovereign Immunities Act (FSIA) would have indemnified Argentina from virtually all of these suits. FISA lets sovereigns opt out of its protections, which Argentina did. Argentina waived immunity from suit in New York state or federal court and its immunity from the attachment of its assets within the US to satisfy a judgement.   In this particular case, it also agreed this issuance of debt would ""rank *pari passu* [with its other debt obligations] and ***without any preference among themselves***"" (emphasis added) (1994 Bondholder Agreement). This is the clause the court used when deciding whether Argentina could pay some bondholders and not others. It is fairly unambiguous that bondholders are all on equal footing. It also added that these debt obligations would rank at least equally with Argentina's other unsecured debt.   This was not a coincidence. By issuing in New York and subjecting itself to New York/US law, Argentina was able to obtain a *much* more favorable borrowing rate. Argentina was the drafter of the debt agreement where it promised to treat all borrowers the same, and it was the party who waived its immunities inherent under US law. It benefited greatly from the substantially lower borrowing costs it enjoyed by doing so.   Because Argentina waived its sovereign immunities, the court looked to the language in the contract. It states the debt will all be treated the same, and will be subject to NY/US law. It is hard to say it is ""unfair"" for a New York court to enforce a contract Argentina wrote and then subjected itself to New York jurisdiction/law.   NOTE: Three US government agencies sided with Argentina (Justice, State, Treasury), claiming FSIA should at least partially apply regardless of waiver. They made mostly policy arguments about how sovereigns should enjoy at least partial immunity. Argentina's debt contract was very liberal with its waiver of sovereign immunity, so it is not surprising the court looked to the actual contract when deciding what rights bondholders have."
"And if you subtract that 30% (the 19% Social Security and 11% Fed holdings) which are entirely bogus and moot...  Then that 32% (out of the remaining 70%) is pretty darned near half, and regardless of it being just shy of a majority, it is still the largest block.  Even then, since the dollar itself is backed by nothing, it isn't technically a problem -- the US can pay it off at any time (the only inherent cost being the debasement of the currency).  Where the problem with that comes in is that there are a LOT of US assets located on foreign soil (all of the ""joint-operation"" manufacturing plants in China, for instance); and foreign governments CAN hold them ""hostage"" (so to speak), or if they so choose, to literally confiscate (nationalize) them and yet legally ""compensate"" their US based paper-owners by paying them off with the debased dollars (and/or US treas bonds, same thing really)... basically just ""paying"" us with checks drawn on our own collective account."
China actively SELLS US Treasuries.   http://online.barrons.com/article/SB50001424052748704097904577257030958775246.html  The Chinese are not stupid.  Why the fuck would someone buy a 2 year at .2% when inflation is over 1% PER YEAR?    So insolvent banks can park collateral at Central Banks for cash.  This is why the balance sheets of developed world nations have exploded since 2008.  http://www.alsosprachanalyst.com/economy/charting-central-banks-balance-sheets.html  edited: for unnecessary rudeness
Either way you'll be converting to US Dollars somewhere along the line. You are seeking something that is very redundant
Venezuelan has lots to offer with there oil.  It is just a matter of getting it out of the ground.  But I don't think the government will last long enough to pay back the bonds.  However  Goldman Sacks might know something we don't.  The second this revolution goes hot investors will lose almost everything.
Right to all of that but don't they still need US Treasuries to keep their currency competitive? Even if they don't need USD to buy and sell their goods, the skyrocketing value in their currency would grind their exports to a halt, no? And even then, losing such a massive part of their trade would be catastrophic.
No. And just a caution about that super low risk: suppose that you lived during the late 70s and early 80s, when savers in the United States could get interest rates over 10% for savings.  You put your money into an account in 1980, knowing that in five years, you'll have made a solid amount of interest.  Except that you might have been smarter to convert your money to AUD and save in that currency because it would have moved from 0.88 in value to 1.43 in value (in principal only, not interest - when I look at the RBA's bank interest, it appears they were also paying double digit interest to savers). Now, I get that this may not be the answer that you want to see because it means that if the interest rates were higher in the US, for savers, they might be higher elsewhere too, and it also means that what may appear to be a super low risk could actually be a high risk.
Is it sensible to keep savings in a foreign currency? The answer varies from one country to the next, but in the UK (or any other mature economy), I would advise against it. There are better ways to hedge against currency risks with the funds readily available to you through your ISA. You can keep your money relatively safe and liquid without ever paying a currency exchange fee.
It's called carry-trade. They can borrow from governments that have 0% int rates, exchange it for dollars, and then buy u.s. treasuries. Japan would never ever raise their interest rates as their economy runs on keynesian fumes.
Just buy a FTSE-100 tracker. It's cheap and easy, and will hedge you pretty well, as the FTSE-100 is dominated by big mining and oil companies who do most of their business in currencies other than sterling.
Very interesting article, thanks for posting. It's going to get really interesting really fast if investors force governments to raise taxes to pay investors, regardless of who's 'right' in the situation.   On a related note, I read awhile back that many US cities have sold the rights to various public areas to foreigners. For example, I believe Chicago sold the rights to collect parking fees along certain streets for 75 years to a company in the Middle East. Some cities then found that if they wanted to have a parade down that street, they had to compensate the company that owned the parking rights because they wouldn't collect any revenue the day of the parade.   I can't see how this ends well for the US economy.