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Fiscal Cliff Making a Dent in Your Portfolio? Sell Equities and Invest in a Short Term Certificate of Deposit
 

Fiscal Cliff Making a Dent in Your Portfolio? Sell Equities and Invest in a Short Term Certificate of Deposit

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Now that the Election is over the markets are firmly focused on the Fiscal Cliff heading our way in the new year. Both equity and commodity prices tumbled yesterday as investors ran for the exist worried about the financial problems in Europe, automatic spending cuts and the Bush tax cuts ending in the United States.

Until these issues are resolved now is probably a good time to reduce your exposure to equities and commodities and place those funds into a certificate of deposit. Current CD rates on both short term and long term certificates of deposit are low but your capital won't be at risk, that is if you keep your deposit amount with interest below the FDIC insured maximum of $250,000.

I recommend sticking with short term certificates of deposit that way you can in a position to sell once the CD matures and reinvest in stocks and commodities. Yes you could just sell stocks or commodities and the money is automatically placed in a brokerage money market account but the interest rate on money market accounts are considerably lower than the best CD rates around.

For example, brokerage money market accounts on average are paying less than 0.05 percent while the highest CD rates right now on 1 year certificates of deposit are paying 0.25 percent. Right now on our 1 month CD rates at banks list Virtual Bank is paying a 30 day CD rate of 0.25 percent.

If you want a slight higher CD rate you can invest in a longer term certificate of deposit like a 3 month or 6 month certificate of deposit. Bank CD rates on these certificate of deposit terms are natually higher. Current bank CD rates on 90 day certificates of deposit can be found as high as 0.65 percent from E-Loan.com. In fact, that is probably one of the best CD rates available on any 3 month certificate of deposit.

Moving onto 6 month CD interest rates, Doral Bank is offering an incredibly high CD rate of 0.91 percent on a 6 month certificate of deposit. If you haven't invested in CD accounts in the past several years these CD bank rates probably seem very low to you but these rates are consideribly higher than average CD rates availabe.

Every week the Federal Deposit Insurance Corporation (FDIC) publishes weekly average bank CD rates. In this past week's survey the average 1 month CD rates were at 0.07 percent, 3 month CD rates were at 0.10 percent and 6 month CD rates averaged 0.16 percent. The rates we publish are all much better CD rates than the average rates available.

Remember the longer the term you select to temporarly place your proceeds from your sale of equities, bonds or commondities the higher the CD rate you will receive but you also run the risk of having to do an early withdrawal if the fical cliff is resolved.

Author: Monica Harris
November 8th, 2012