Are people who use CD to save money stupid?

[K_S]

I don't get why people are willing to settle for 4% or less a year.
Are they
a) stupid
b) lazy
c) rich and don't care?

Don't give me that "better than nothing" BS, here's what IS better than 4% a year (without being fined if I ever wish to withdraw early).

* If I had $100, I'd just save it, all I need is to watch out for coupons, holiday savings and compare deals, I'll easily save myself $5-10. In as little as ONE transaction, I have $105, more than what you waited a year for.

** If I had $500, I can put it aside, and save up that extra $5 a week I'm saving on gas for 4 weeks, and I'll have $520.

***If I had $1,000, let's see, if I lived in a major city, where the local college or high school uses the same graduate cap and gown every year, how much do you want to bet you can't ask somebody to sell their used one for $10-20, and sell it for $30-40 next year? In order to beat the CD rate of 4%, you only need to make $50 profit, which means, you only need 5-10 people out of a school of 300, to sell you their gown, and you can sell it again next year to another 5-10 people who'd rather save $10+, sell it for $10+ what you bought it for, and you've made $50-100.

Or, if I lived near a college, I can just spend a few hours a week researching what books they are buying, buy them up at Half.com for fraction of the price (math and science are usually the hottest). I'll only need to sell them to students for $10 more than I bought it for, and 5 books will return me $50. Less than a week worth of labor paid me more than waiting one year, how's that?

***If I had $10,000. I'd first be stupid to not make sure I'm debt free. After that, I can easily flip used cars by buying them from desperate people, fix and clean it up some, and sell it for a 10-20% profit.

I'd also be stupid not to buy up bulks of silver coins and flip them right away for a 10% profit. (can be done in less than a week, silver is only $15 an ounce, you think with a few thousand dollars they can't give you a 10+% discount?)

****If I had $100K, and no debt, I'd be stupid not to hunt down foreclosed houses for under $50K (not right away, but wait and see). Flip it the first chance I get. In order  to beat the 5% interest CD gives, I only need to sell a house for $5K more, within a year.

So, with all these simple ideas. Can you seriously be so stupid, so lazy and so rich to let them hold your money ONE WHOLE YEAR for only 4% ? OH, AND RISK BEING FINED IF YOU WITHDRAW EARLY?
I have tried most of these things, but only those under $5000. I started with $500 a few years back and I'm now at $5000+. I'm not a millionaire, but I certainly wouldn't be either if I settled for 4% a year.

[Kay]

It depends on your time horizon. If you are in your senior years, 4% a year  without your principle amount detreorating and FDIC insured would be attractive. Right now, it's better than investing in stock market domestically or internationally.

I don't quite understand your question, but if you meant to be just sarcastic, you made your point.

[doreen_k]

I'm sure you're very clever, and you seem to have it all figured out.  Just make sure that no one else catches on because then you might have some competition.  You may have overlooked the fact that if it these activities were all such sure things, a lot of people would be doing them.

But, don't let me rain on your parade!  Try those things - you don't have to invest a lot upfront, and who knows, maybe you'll soon be a millionaire.

And, be kind to those who invest in CDs - like me!  I'm too busy making money doing other things - consulting, writing, and volunteering - to chase a buck in exactly the same way as you would want to do.  At my age, I have a small percentage of my funds in stocks and bonds and the rest in CDs and guaranteed income funds.

[Chris_Pascale]

Very interesting, and nice to see you must be an expert on silver and such commodities.  I know that most of the commodities experts (and none of the people who just recently read Robert Kiyosaki books) are the ones on Yahoo Answers condemning people who are saving, albeit at a loss.

Your ideas are sound and I hope you go after them, but many people with professions do not have your entrepreneurial spirit.

To answer you Q: no, they are not stupid, lazy, or rich.  Most are just trying to hold on to what they got and are some are scared.  One low interest investment I have for my kids is I-bonds.  They gain about 4.3%.  Each time they receive money from a relative I let them have some and put the rest into a bond.  Some say this is dumb because I could put into a mutual fund, but with trading and broker fees the funds would have to gain 12-16% to outperform the bonds given the small amounts I purchase at a time.  Additionally, unlike many of us, I'll be able to give something to my kids when they come out of college that will be a much appreciated gift I'd been accumulating for them over the years, which, if received today, would go to Toys 'R Us, and tomorrow to the mall.

[plezurgui]

ALWAYS, the better the return, the more risk that is involved.  If you absolutely could not stand to lose the money, then you should put it into some very safe instruments and CDs are in that category.  My Mother has all of her savings in CDs, but she is not able to get on the internet and is not savvy enough to do real investing.  She grew up poor and has saved what little she has over the years.  Safety of her investment is very high on her list.

[couchcashdotcom]

Did you ever consider that maybe it's there for safekeeping and not gain? Some people don't need more, just to insure they keep what they have safe.

[DANIEL_G]

Have you tried any of the things you mention?  It looks like you should already be a millionaire.

Nothing is guaranteed in life.  Just look at recent economic activity.  People are loosing their jobs, their savings, etc.  4% looks pretty good right now.

[Powerful_Spirit]

I used to have a CD but when it expired I just moved all the money into a savings account that gets about 2%. This gives me access to my money whenever I need it and is free investment without paying any middlemen or handling fees like a broker. Also, it is as if purchased insurance comes along with it - there is 100% chance that it will not be lost. I keep it separate from my checking account bec I won't get tempted to spend it. It's a win-win situation I think. With all the other extra money I make, I use that to pay down my mortgage and bills which are higher rates than any investment, so this works for me and I'm not lazy or stupid, just believe in better to be safe than sorry - I know a lot of people who have lost all their savings but I have all of mine and can literally laugh all the way to the bank