Should CDs Be in Your Portfolio?

Even though bank CD's are delivering historically low interest rates, investors should not ignore them as part of an overall investment plan. If one of your goals in your investment plan is diversification and safety then some cd's in your portfolio can provide this.

Maybe your as old as me and remember the days when cd's had rates as high as 15%. This occurred back in the days when Jimmy Carter was our president and inflation was rampant. I owned CD's at those rates and thought this is not to bad. Fast forward to today when the average cd's interest rate is one percent. Ouch! Why even bother?

According to Bankrate.com, the best six-month CD is paying an annual yield of just over 0.75% and one-year CDs are averaging 1%. These kinds of rates have turned away many previous owners. Many of our retired people used CDs exclusively because they were a hedge against inflation and also gave a nice return you would be able to live on. But today if you factor in inflation, you may even be experiencing "negative real yield" according to the Wall Street Journal. This is why people stay away from them. Why lock in your money for low or even negative returns.

The Benefits of Bank CDs

Is there a silver lining to CDs? One thing is for sure, they are definitely a safe investment. They are guaranteed by the Federal Deposit Insurance Corp. (FDIC) up to $250,000 per depositor, per bank. 

If you want to keep your money in a safe place that is guaranteed other than CDs you can look into U.S. government bonds that offer similar safety. Only problem with government bonds is that they average around 0.17%. For safety, CDs offer a guaranteed return and investment safety. For the small investor CDs provide an easy to understand way to make a small return on their savings.

The Uses for Bank CDs

Cds are about as simple as it comes to a safe interest bearing investment. Part of an overall investment portfolio strategy is having some money in a 100% safe investment vehicle. CDs perform this task well. If you are putting away cash for a future purchase and want it in a safe place then CDs are the way to go. You could be saving for a down payment on a home or a child's education. Long-term savings plans can use CDs as a tool to save for a particular amount of time. The longer the better. CDs can be the place you keep the part of your portfolio that you don't want to expose to market risk. 

Emergency funds can also be kept in CDs. By staggering the maturity dates over the next few years you always will be having one CD maturing. You can either take the money and use it for some emergency situation or re invest it. This technique called the "CD Ladder" allows you to constantly have money coming available for your emergency needs. Having the money this way helps you avoid the need to sell some stock investments in time of need. If you didn't have this easy way to access your cash you would be forced to sell some of your stocks or mutual fund investments. Quite possibly when you need money the most, your stock or mutual fund will be at an all time low. One of the best places to keep idle cash is in a CD.

One place that is offering very generous interest on CDs is CIT Bank. If you want CDs to be a part of your diversified portfolio, they offer some of the highest paying CD interest rates available today. 

Click HERE to view more details or sign up for a CIT CD account and 1.75% APY !

6 Tips for First Time Home Buyers

You've finally decided to make one of life’s biggest decisions – buying your first home. No longer will you have to deal with stuffy landlords, exorbitant rent prices, or annoying neighbors—you will finally have a space you can call all your own. Now that you've made this very adult decision, you need to consider a few things before you make one of the biggest purchases you will make in your entire life. Before you buy, you need to ask yourself some serious questions. If you already own property and are looking into purchasing income property, you will also need to do your homework.

Tips for Homeowners 

1. Know Your Budget and Mortgage Basics 

It’s important to know what you can afford to spend before you seriously start looking to buy. It is also equally important to know how much mortgage you qualify for. Look for first time homeowners seminars in your area to get more information or speak to a representative at your bank.

2. Get a Real Estate Agent you Trust

Looking for your dream home on your own can get overwhelming. This is where real estate agents come in. They can help you figure out the logistics of a sale, will negotiate prices for you, and will do all the paper work. It’s important you have a good rapport with your agent and that they know what your needs and wants are. Remember, you are the one who will be living in this home, not them.

3. Make a Smart Offer

Your real estate agent can help you navigate this important step of the purchasing process. This is your time to name a price as well as your conditions for purchasing. More than likely the seller will counter-offer, putting the ball back in your court. Once you come to an agreement, you will go into escrow which means you have 30 days in order to inspect and purchase the property.

4. Get a Home Inspection

During the escrow period, it is your responsibility to get a home inspection. During this inspection a trained professional will check every inch of the property to make sure it’s safe and sound and ready for purchase. If they find any issues (mold or other deficiencies the seller did not mention), you can still retract your offer.

5. Read Before You Sign

Like all things in life, it is always crucial to read the fine print before you sign any agreement. It is also important to get everything in writing and avoid verbal agreements. Your banker and real estate agent can help walk you through any language or steps you are unsure of.

6. Cover all Angles on Your Income Property

Income property is property that is bought with the intention of renting or leasing. It is a higher risk than owner occupied properties, but can be beneficial in helping you off-set the costs on your own home and bring in extra income. Before purchasing a residential or commercial income property you need to do your research. Know your rights as a landlord and see if the time and money put into the property will put you out ahead in the long run.



Angie Picardo is a staff writer for NerdWallet, a personal finance website dedicated to helping homeowners find the best credit cards.

How To and Why You Should do Personal Saving?

saving and spending (Photo credit: 401(K) 2013)

Saving money may seem like an easy task but not everyone can or knows how to do it. Having your own personal savings not only makes you financially responsible to the eyes of others, but you will be securing your future and you goals as well. 

Here’s how to save money easily:

Decide a Goal

It is easier to start saving if you have a goal. Determine what you want to achieve and let that goal/s motivate you. Your goal can be a dream vacation, to move in to a better house or apartment or to build your future nest egg. The more goals you have the better; however, do not get carried away and try to focus on your goals one by one to make it easier to attain. Categorize your goals in two, your short term and long term goals. 

Manage Your Expenses

Now that you have your goals, the next thing you should do is make a list of all your expenses in a month and even your debts and list of assets. This will give you an idea on how much you are spending and the amount of money you can save within a month. You should also get the amount of money that you receive every month. This should include your salary, benefits etc. Subtract your expenses to the amount of money you receive and if your expenses are less than your income, that means you’re all good for the month. If not, you might want to make a few adjustments to be able to make it fit and to be able to allot some money on your savings. 

Identify the Investment

Next, you should identify the amount of money you need in order to achieve your goals. If for example you are saving for a $1000 vacation for the next year, you have to set aside at least a $100 every month to get it covered. To make this easier to follow, you should create a plan of your own that you are comfortable in. Some people have their salary automatically sent to their savings account so that they won’t be tempted to spend it. You can choose to do the same or just manually set aside the amount of money you want to save. 

Track Spending and List

You still have to keep track of your spending and you have to list down everything to be able to keep track of it. Take a look at your monthly budget to make further adjustments or even to eliminate a few things. 

Reward Yourself

Reward yourself every now and then for achieving your monthly goals. Just don’t get carried away with spending what you have saved. This will help you appreciate what you’re doing and you’re more likely to continue funding your personal savings.

Additional Tip: Don’t forget to keep track of your credit as well. It can help you get loans with lower interest rates and it can even help you get a car, mortgage and even your job. Get a copy of your credit report and estimate your credit score to make sure that it is always in good shape.

Keep in mind that in order for this to work, you have to discipline yourself and set your mind to it. A few sacrifices and tons of effort may be necessary to get through this task, but if it means that you’re straightening up your finances, then all of your hard work is surely worth it. Follow these tips and work your way into building and securing your future financially.

Joy Mali is an active blogger who shares extremely interesting finance management tips over the web that encourages people to manage their personal finances, check credit score regularly and review how credit score changes in different scenarios through a credit score estimator before taking any important financial decision.

All About Relevant Life Policy

Relevant life policy is a kind of life insurance policy that has been breaking out on the market for over last 12 months. This insurance policy is typically designed to give directors and employees tax efficient life insurance policy which can be paid by a Limited Company with the beneficiary being a named person. In other words, it is an insurance proposed by an employer on the life of an employee to provide death in service benefits. This kind of insurance plan is restricted only to provide life cover and is not allowed to cover critical illness or income protection. 

Suitability of relevant life insurance policy:

A relevant life insurance policy is suitable for any employee, including a director of a limited company, provided that they are a schedule e-tax payer. This kind of insurance policy is suitable for small businesses that do not have abundant employees to warrant registered group life scheme. However, group life providers will not usually offer schemes to businesses that have less than 5 employees. But even if they do, they are not allowed to offer a registered scheme on single life basis. Therefore, it can be said that many small businesses are barred from enjoying the advantages of relevant life insurance as enjoyed by large businesses.

Registered group schemes come under pension legislation's and thus, lump sum benefits are added to the employee’s pension fund on his or her death. Hence, certain high earning employees are also fit for this relevant life insurance. 

Advantages of relevant life insurance:

Premiums of relevant life insurance policies are usually paid by the employers but are not treated as the income into the hands of the employees. While the plan is qualified as a relevant life policy, by meeting the legislative requirements, no charge will be made for income tax on the premiums given by the employee.

A few important conditions in order to qualify as a relevant life policy:

Now let us take a look at some of the important conditions in order to qualify as a relevant life policy –

• One of the most important conditions to qualify as a relevant life policy is that the plan must be able to provide a lump sum on death before the age of 75. 
• This kind of insurance plan can only provide benefits on the death of the employee. Critical illness benefit, disability income benefit or any such benefits cannot be provided by the relevant insurance policy. 
• The policy usually cannot have a surrender value. This is not an issue with self assurance as it is term assurance plan. Hence, this will not acquire a surrender value. 
• With relevant life policy, benefits are paid either to an individual or to a charity and this can be paid through a trust. There are many insurance companies that issue relevant life policy under a discretionary trust. 
• Relevant life policy is usually tax-free. However, the main purpose with this policy should not be tax avoidance. HM Revenue and Customs (HMRC) guidance indicates some tax avoidance situations where less tax is paid than Parliaments intended, or more tax would have been paid if Parliament had turned its mind to the specific issue in question. 

However, if you are hunting for relevant life policy, search around well in order to obtain it from a legitimate insurance company. Bright Grey Relevant Life Policy would be a viable option for you that offer a list of benefits such as unique individual stand-alone cover, tax advantages for high income group, premiums not taxed, cover 15 times annual salary for clients aged over 40 years or so.

Author’s bio: Sam Payn is a well-known blogger, who loves to write articles. He has contributed a plenty of articles on finance and insurance related to different blogs. He has written on how to obtain life insurance, things to consider when going for relevant life policy, relevant life tax advantages and many others. 

Image Credit: http://www.flickr.com/photos/90486418@N04/8383483412/