Ray Dalio’s Advice is Not For You

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Ray Dalio is a Greenwich-based hedge fund manager.   I don’t know Ray, but by all accounts he is a very successful operator with excellent performance and a smart guy.

Dalio has recently been playing his hand at making far out comments in order to gain attention.  Dalio is generally very discrete and responsible (for example, he did not go on CNBC when Bitcoin hit 19,000 and say it was going to 40,000 like other frequent CNBC guests).    Nonetheless, his latest piece of advice is not for you.

You see, Dalio stated to CNBC that saving money in cash is “the worst thing you can do.” 

Dalio correctly stated that cash is tax disadvantaged and that you are taxed on interest at ordinary income rates, making cash a less advantaged asset class from a tax perspective than many of other alternatives where income generated has favored treatment (dividends from equities, for example) and where capital gains can be achieved.

But, Dalio overlooks the fact that cash is always going to be there from day to day.   You won’t loose 2/3rds of it as you did in 2000 – 2002 or as you did in 2008 – 2009, or as many of his Greenwich-based hedge fund brethren have done in a rising stock market over the last several years.    And, if you aren’t old enough to remember those periods or familiar with these types of losses, you can read about the losses people have recently had on bitcoin or look at the market’s fall in just the week after Dalio’s comments.

For those people who aren’t billionaires and who are dependent on maintaining their current asset levels in order to secure the education of their children, cash is a necessary and appropriate place to be and it can be an appropriate place to be with a substantial part of your portfolio for long periods.

To boot, cash doesn’t earn the 0.09% that Dalio assumes that it earns when he says that it doesn’t keep up with inflation.  The leading online savings accounts are paying upwards of 2.25% at the moment, and 1-year online CDs can be found at 2.70%.   Dalio needs to familiarize himself with the rates on BestCashCow (or our competitor’s sites) before he makes incorrect statements such as that.

Note to Ray Dalio, as of the date of this article, cash, even if it were only earning 0.09%, has outperformed the stock market, the bond market, EM, bitcoin and real estate in 2018.   It is certainly looking like it might outperform these asset classes in 2019 as well.


A Lesson for your Kids about Math and Money

It’s very hard to figure out when and how to discuss money with your children.  It’s almost as difficult, surprisingly, as talking with them about sex.  But there is an easy way, one that also gives them at the same time an unusual introduction to math, especially fractions and multiples.

Today, banks (and there are an unusually large number of both online banks and brick-and-mortar banks) compete with one another to offer the best interest on both short and long-term money accounts and CDs.  In fact, there is a dizzying array of offers out there of constantly changing rates.

For parents and children the new environment and competing banks offer a perfect opportunity for introducing easy to grasp but highly important skills in money management concepts and division and fractions.  Equally, bank interest rate competition also provides an environment of very low risk, making things both fun and safe.   Many online banks – including Ally and CIT – make it particularly easy to open a savings account for minors.   Such a savings account is a far safer place to put allowance, presents or earnings than trying to teach your kids to experiment with small stock purchases as a way to introduce concepts of income generation and the like.

What makes it all even better for introducing math and money matters to children is that there are a number of sites, including BestCashCow, where the primary focus is on tracking and making easily available changes and fluctuations of interest and CD rates over short periods of time and across the spectrum of the nation’s banks. 

In particular, this site and RatesAndInfo.com have great calculators that offer a real resource to demonstrate to your kids the value of compounding money throughout their lifetimes, and the importance of incremental improvements in a savings rate when compounded over time.


BestCashCow's Best Bets in Online Savings and Money Market Accounts for 2019

The Federal Reserve moved in September 2018 to a 2 – 2.25% Fed Funds rate, and savings and money market rates are now firmly above 2%.    

Interest rates are poised to go up again in December 2018.  Unless Trump fires Jay Powell, the Federal Reserve will likely continue to raise rates in 2019 until it reach its stated 3% + neutral rate by end of the year.

Not everyone checks BestCashCow.com or competing sites every day in order to get the best savings rates.   In fact, there are people who don’t even check monthly or quarterly.   And, most people just don’t like the hassle of moving around large amounts of cash in order to continue to get a competitive rate as rates rise.

For these people, BestCashCow has developed our Best Bets in Online Savings and Money Market Accounts for 2019.   On this list, you will find the five online bank accounts that have correlated the strongest with each Federal Reserve move (the highest beta).   For each of these accounts, we have recorded a savings or money market rate increase either just before or within days of each Fed Funds rate increase over the course of 2018.  

If interest rates continue on their current trajectory, we believe that with these 5 online savings and money market accounts, you are most likely to wake up on December 31, 2019 and learn that your savings rate has increased with each Fed move over the course of the year.

Excluded from this list are those banks that have maintained rate competitiveness over the course of 2018 but have exhibited a tendency towards requiring existing depositors to move their money between accounts (from savings to money market or vis-a-versa) or from one brand to another in order to get the best rate.   It isn’t that we don’t like these banks and these rates, but this list is designed for those depositors who want to go to sleep for 2019 and do not want to worry about whether they are earning a very competitive savings or money market rate.

Here is BestCashCow's list:

  1. Citizens Access
  2. CIT Bank
  3. Sallie Mae Money Market
  4. Marcus Savings
  5. Purepoint

See the best online savings and money market rates today

Advertiser Disclosure: This list contains advertisers and non-advertisers.   No bank, advertiser or non-advertiser, has provided any consideration for inclusion in this list.   Please read our advertiser policy here.


November 2018 Update – Five Nationally Available Online Savings And CD Accounts to Consider

Rate information contained on this page may have changed. Please find latest savings rates.

Online savings and CD rates rose in October.  We continue to favor savings rates over CD rates.   It remains likely that the Federal Reserve will raise the Fed Funds rate from its current 2.00 – 2.25% Fed Funds rate to a 2.25% - 2.50% rate in December.   While the Fed continues to guide towards a Fed Funds rate over 3.00% before the end of 2019, it is increasingly possible that Presidential histrionics and/or a slowing economy may temper those moves so locking into online CDs may be an attractive proposition to some. 

Here are 3 savings accounts that we find interesting at this point:

  1. Citizens Access – 2.25% Savings Rate for balances over $5,000

Citizens Access is a division of Citizens Bank, N.A., a large established bank with over $150 billion in assets.   It entered the online market in 2018 with a competitive 2.00% savings rate and has been quick to move rates up in response to Fed Funds moves.   The reviews of the bank on BestCashCow are extremely positive.  

Editor’s Note:  Citizens Access is an advertiser of BestCashCow.   Please read our Advertiser Disclosure here

  1. MySavingsDirect – 2.25% Savings Rate, No Minimum Balance

MySavingsDirect is a division of Emigrant Bank, a large New York-based bank.   While the rate is attractive, Emigrant has developed a customer-unfriendly practice of remaining competitive for new customers by raising rates at different subsidiaries when the Federal Reserve moves.   This practice leaves earlier customers earning a non-competitive rate.   As rates continue to rise in 2019, you can expect that you will need to move your assets out of MySavingsDirect (perhaps to another Emigrant subsidiary) in order to stay competitive.  That’s an OK strategy so long as you make a plan to check the latest savings rates on BestCashCow frequently.   The good news is that Emigrant’s divisions make accounts easy to open and fund.

  1. Marcus – 2.05% Online Savings rate for balances over $1

Marcus has outstanding customer reviews and lightening fast ACH transfers.  Since Marcus is part of Goldman Sachs, depositors, especially those inclined to deposit over FDIC limits, can always sleep well at night.   Importantly, as rates have risen through 2018, Marcus has proven to be faster to raise rates than the other most recognized online banks (Amex, Barclays and Ally).  While it may not always sit on top of the table, depositors with Marcus can anticipate that their savings will remain competitive as rates rise.   Those depositors who follow rates closely and are prepared to make adjustments as rates rise can now get 2.15% in Marcus’s 13-Month No Penalty CD.   We recently wrote an article highlighting No Penalty CDs as a relatively risk-free way to boost your savings rate

Editor’s Note:  Marcus is an advertiser of BestCashCow.   Please read our Advertiser Disclosure here

See and compare all of the best online savings rates here. 

Those compelled to reach for the higher rates than online CDs offer after a decade of abnormally lower returns on cash may want to consider the following two online CD products:

  1.  Citizens Access – 2.70% 1-Year CD for balances over $5,000

Citizens Access, mentioned above for its online savings account, is also offering one of the most competitive online CD rates nationally available.   Even if savings rates are above 3.00% at the end of 2019, we don’t think you’ll make much less though 2019 by locking into a one-year CD throughout the course of the year with cash that you know you won’t need to access.   Citizens Access has an early withdrawal penalty on CDs of 12-months or less of only 3 months’ interest.

See all of the best 1-year online CD rates here.   You should also compare locally-offered 1-year CD rates here.

  1. Citizens Access – 3.05% 3-Year CD for balances over $5,000

We are inclined to question whether a 35 basis point improvement over Citizens Access’s one-year CD rate represents an attractive enough premium for an additional two years’ commitment.   However, many economists believe that inflation is not present and that the Federal Reserve just is not going to ever get much above a 3% Fed Funds rate in this cycle.  Citizens Access’s early withdrawal penalty on CDs over 12 months is equal to 6 months interest on the CD which is shorter than the penalties for early withdrawal on long-term CDs charged by many other online banks.

See all of the best 3-year online CD rates here.   You should also compare locally-offered 3-year CD rates here.

Have a great month and Happy Thanksgiving!


No Penalty CDs May Offer An Easy Way to Boost to Your Savings Rates

Rate information contained on this page may have changed. Please find latest savings rates.

Here at BestCashCow, we have been a fan of the No Penalty Certificate of Deposit since Ally began offering it years ago.   It ordinarily offers depositors a slight improvement over a comparable savings rate at the same online bank. Since this product can be terminated easily online with no penalty, it is basically a savings or money market account wearing a  different skin (i.e., a different name). 

In an environment where interest rates are falling, the product is especially good as you lock into a higher rate than savings and have some protection against falling rates.

Interest rates probably won’t fall in 2019, but the product remains appealing as a way to generate a better savings rate.

The two main disadvantages of No Penalty CDs are:

First, you will need to terminate the entire CD in order to make a partial withdrawal (as is the case for most CDs).  Since it can be terminated without any penalty at any time after the first few days, and then a new one can be opened, this is more of a nuisance than a disadvantage for some.

Second, in a rising rate environment, this product only works for those who check rates regularly.  Competitive savings and money market rates - including those offered by the same very online bank - can and do go above the No Penalty rate that you are locked into, and if this happens you will want to terminate the CD and move back to the savings account.  The good news is that if the bank raises the No Penalty rate, you can terminate (again with no penalty) and reopen a new one at the higher rate in seconds.    

Ally Bank is the most prominent player in the No Penalty area and has offered an 11-Month No Penalty CD for years.  The best rate is usually only available for those with $25,000 or more to invest.  Since Ally is currently offering a 1.90% rate for online savings and a 2.10% rate for this product, we think that it is more attractive at the moment than their current savings rate, so long as you have the $25,000 to invest.

CIT entered this market earlier this year with an 11-Month No Penalty CD that offers a 2.05% rate.  However, since CIT is now offering 2.15% in its Savings Builder account, we think that product is better for those meeting its requirements (depositors maintaining a $25,000 minimum balance or who deposit $100 each month).

Marcus began offering its first No Penalty CDs yesterday when they introduced a 13-Month No Penalty CD at 2.15% with only a $500 minimum deposit.   Since Marcus’s online savings rate is now 2.05%, depositors considering opening accounts and existing depositors are likely to find this attractive.

No Penalty CDs aren’t for everyone.   As noted above, you shouldn’t consider them unless you do not anticipate needing the principle often and quickly and you are prepared to follow rates.   But, if you meet these criteria, they just might be worth a look.

BestCashCow lists all online No Penalty CD rates and other special CD rates here.   You may also find No Penalty CDs and other special CD rates from local banks near you here.


Chase Unveils Sapphire Banking; It is Worth a Look for Those with $75,000

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Here at BestCashCow, we’ve always been big proponents of earning the highest possible interest on your cash accounts (savings, CDs, checking).   We are also big proponents of maximizing your credit card travel rewards by using the most valuable cards for your spend.(hyperlink /credit-cards)

We’ve noted as recently as yesterday that Chase is simply not competitive with the leading online banks when it offers 0.01% interest.   It is remarkable that some customers continue to deposit large sums with Chase at that rate.   It simply makes no sense.

Those who follow our credit card section know that we also value Chase’s Ultimate Rewards points – earned through the Sapphire Reserve Card and the Sapphire Preferred card – at around 2.05 cents.   While Chase enables Reserve cardholders to redeem these Ultimate Rewards points directly for travel credits at 1.50 cents per point on its travel portal (and Preferred cardholders at 1.25), we think that they are worth much more than that when transferred to, and redeemed through, a partner like Hyatt, United or Singapore Airlines.

60,000 Chase Ultimate Rewards points transferred to Hyatt, for example, will get you 2 nights at the Park Hyatt Vendome in Paris or the Park Hyatt in New York (50,000 will get you two nights at the Churchill in London).   Redeemed in this way, the 60,000 points achieve more than 2.05 cents in value and dramatically more than $468.25.  

Where is the $468.25 number coming from?   $468.25 is the interest you are going to earn on $75,000 if you were to deposit it in an online bank over the next 3 months at 2.50% (the highest online rate currently available).   But, if you use that money to try out Chase’s Sapphire Banking over the next three months, they will give you the 60,000 Sapphire Points.  We think that makes good sense.   In fact, it makes sense even if the $75,000 is sitting idly in Chase for the next three months.

You can sign up for Chase’s Sapphire Banking directly on Chase’s website, but to receive the 60,000 points you need to be a current holder in good standing of either the Sapphire Reserve or Sapphire Preferred cards.   It is also possible that, unlike with the sign-up bonuses for those cards, you will receive a 1099 for the 60,000 Ultimate Rewards points, as in this case the points are an interest alternative and not necessarily tax free as they have been ruled as a reward for credit card spend.  But, even if you receive a 1099, the value is still there (the $468.25 that you are foregoing would also be fully taxable on a 1099).

This marks the first time since 2013 when it has made any sense for depositors to consider something other than cash interest for their savings.

Check online savings rates here.