Like most financial gurus will tell you, I too believe that time in the market is better than timing the market – but taking a pause and re evaluating every now and then is not a bad strategy either.
With that said – what do you do with whatever money you have on the sidelines, waiting for a 5%, 10% or even 20% correction from this point ?
Put it in an online savings account returning 1% interest a year, or put it in CDs. A great option at this point is Andrews Federal Credit Union. They currently offer a 7 year/84 month savings certificate (CD) which yields a 3% interest rate. I believe that is amazing, even more so considering that they have a 6 month early withdrawal penalty. How does that matter you ask. Let me explain with an example. Open the savings certificate with say $10,000. A years interest would be $300, and a six month penalty is a flat $150 no matter when you close your account.
Close after –
a year – 10,000 + 300 – 150 = $10,150 (effective rate – 1.5%)
2 years – 10,000 + 600 – 150 = $10,450 (effective rate – 2.25%)
3 years – 10,000 + 900 – 150 = $10,750 (effective rate – 2.50%)
4 years – 10,000 + 1,200 – 150 = $11,050 (effective rate – 2.625%)
5 years – 10,000 + 1,500 – 150 = $11,350 (effective rate – 2.70%)
6 years – 10,000 + 1,800 – 150 = $11,650 (effective rate – 2.75%)
As you can see, almost every scenario above beats the current best rates for that category in the market. Like every other credit union, Andrews is federally insured by the NCUA for up to $250,000.
You can easily open an account with them by following a couple of steps. Jonathan from mymoneyblog has a pretty detailed post about this here
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