I had the pleasure of spending 4 hours of quality road time yesterday driving to East Texas for a client meeting. On multiple AM channels, I heard an advertisement for an “investment” that was “like a CD” using words such as “Safe” “Predictable” “Stable”.
Here’s the kicker. This 1 year investment offers a 9% return.
Think about this for a minute.
A 1 year – “Safe” “Predictable” “Stable” – “investment” yields a 9% return. Who wouldn’t want that?
ME. And neither should YOU.
Let’s put this into a little perspective….As I write this, the current yield on a 1 Year Treasury is .6923%. Let that soak in. A 1 year US Treasury — what is widely considered to be a low risk investment — currently yields .6923%.
9% — That’s 1,200% higher than a 1 year US Treasury.
I stopped the bank this morning on my way to the office. A 1 year CD yields me a whopping .05%. That’s right. An FDIC insured CD only yields .05%.
9% — That’s 17,900% higher than a FDIC Insured 1 year CD at the bank.
I’m not saying this advertised “investment” is a scam – I don’t know. Nor am I implying that earning 9% for 1 year won’t happen. But I will say that the only way to achieve 1,200% greater than the 1 Year Treasury is to accept a certain degree of risk.
Investing 101 taught me that. It also taught me that when it sounds too good to be true, it probably is.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
CD’s are FDIC Insured and offer a fixed rate of return if held to maturity.
Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
