Waited Too Long to Get the Best CD Rates? Here's Another Route to Great Passive Income Returns

Motley Fool09-24

KEY POINTSThe Federal Reserve Board just announced a 0.5% cut to the federal funds rate at its September meeting.With this rate cut, the rates of all interest-driven investment products are likely to ...

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Here's Another Route to Great Passive Income Returns","media":"Motley Fool","content":"<div>\n<p>KEY POINTSThe Federal Reserve Board just announced a 0.5% cut to the federal funds rate at its September meeting.With this rate cut, the rates of all interest-driven investment products are likely to ...</p>\n\n<a href=\"https://www.fool.com/the-ascent/banks/articles/waited-too-long-to-get-the-best-cd-rates-heres-another-route-to-great-passive-income-returns/\">Source Link</a>\n\n</div>\n","source":"fool_stock","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Waited Too Long to Get the Best CD Rates? 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Here's Another Route to Great Passive Income Returns\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-09-24 20:45 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.fool.com/the-ascent/banks/articles/waited-too-long-to-get-the-best-cd-rates-heres-another-route-to-great-passive-income-returns/><strong>Motley Fool</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>KEY POINTSThe Federal Reserve Board just announced a 0.5% cut to the federal funds rate at its September meeting.With this rate cut, the rates of all interest-driven investment products are likely to ...</p>\n\n<a href=\"https://www.fool.com/the-ascent/banks/articles/waited-too-long-to-get-the-best-cd-rates-heres-another-route-to-great-passive-income-returns/\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0053666078.USD","symbol_name":"摩根大通基金-美国股票A（离岸）美元","start_time":0,"source_url":"https://www.fool.com/the-ascent/banks/articles/waited-too-long-to-get-the-best-cd-rates-heres-another-route-to-great-passive-income-returns/","article_id":"2469493192","we_media_id":null,"thumbnails":["https://g.foolcdn.com/image/?url=https%3A%2F%2Fm.foolcdn.com%2Fmedia%2Faffiliates%2Fimages%2FJester-coins-001_PMrhkM2.width-1200.jpg&op=resize&w=165&h=104"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2469493192","pubTimestamp":1727181900,"sourceInfo":{"source_id":"fool_stock","name":"Motley Fool"},"weMediaInfo":null,"summary":"You don't need CDs to have great passive income potential. Check out this other option.","collect":0,"end_time":0,"defaultTopTitle":"fool.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元","IE00B19Z3581.USD":"Legg Mason ClearBridge - Value A Acc USD","QID":"纳指两倍做空ETF","BK4561":"索罗斯持仓","BK4581":"高盛持仓","CD":"秦淮数据","IE00B19Z3B42.SGD":"Legg Mason ClearBridge - Value A Acc SGD",".IXIC":"NASDAQ Composite","PSQ":"纳指反向ETF","QQQ":"纳指100ETF","LU1861217088.USD":"贝莱德金融科技A2","BK4516":"特朗普概念","LU1861220207.SGD":"Blackrock FinTech A2 SGD-H","LU0648000940.SGD":"Natixis Harris Associates Global Equity RA SGD","LU0130102774.USD":"Natixis Harris Associates US Equity RA USD","BK4593":"纳斯达克ETF","IE0002270589.USD":"LEGG MASON CLEARBRIDGE VALUE \"A\" (USD) INC","LU0648001328.SGD":"Natixis Harris Associates US Equity RA SGD","TQQQ":"纳指三倍做多ETF","BK4534":"瑞士信贷持仓","BK4585":"ETF&股票定投概念","LU0130103400.USD":"Natixis Harris Associates Global Equity RA USD","QLD":"纳指两倍做多ETF","LU1201861165.SGD":"Natixis Harris Associates Global Equity PA SGD","SQQQ":"纳指三倍做空ETF","VOO":"Vanguard标普500ETF","LU1201861249.SGD":"Natixis Harris Associates US Equity PA SGD-H","LU0211331839.USD":"FRANKLIN MUTUAL GLB DISCOVERY \"A\" (USD) ACC","VTWO":"Vanguard Russell 2000 ETF","LU0980610538.SGD":"Natixis Harris Associates US Equity RA SGD-H","BK4559":"巴菲特持仓","BK4166":"消费信贷","BK4116":"互联网服务与基础架构","BK4550":"红杉资本持仓","BK4588":"碎股","COF":"第一资本"},"translate_title":"等了太久才得到最好的CD利率？这是获得巨大被动收入回报的另一种途径","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"VTWO":1,"CD":1,"COF":0.9,"QQQ":0.9,"US10Y.BOND":0.9,"US12M.BOND":0.9,"US2Y.BOND":0.9,"US30Y.BOND":0.9,"US5Y.BOND":0.9,"VOO":0.9,"US7Y.BOND":0.9,"US6M.BOND":0.9,"US3Y.BOND":0.9,".IXIC":0.76,"US912797GW17.BOND":0.6,"US912797HE00.BOND":0.6,"TQQQ":0.6,"SQQQ":0.6,"QLD":0.6,"QID":0.6,"PSQ":0.6,"MNQmain":0.6,"NQmain":0.6},"content_text":"KEY POINTSThe Federal Reserve Board just announced a 0.5% cut to the federal funds rate at its September meeting.With this rate cut, the rates of all interest-driven investment products are likely to fall, and some have already started.Market-based investments like index funds are divorced from interest rates and deliver as long as the economy is strong.With the recent announcement by the Federal Reserve Board that the federal funds rate will be dropped by 0.5%, the cost of borrowing for banks has dropped significantly. That means they won't be offering the hot rates that have been available until recently on products like certificates of deposit (CDs).In fact, the yield on savings vehicles started dropping in anticipation of the rate cuts, with 12-month CDs dropping from 5.21% on average in July to just 4.38% on average in September, and 60-month CDs dropping from 4.56% to 3.71% in the same timeframe.The best rates for CDs have already set sail, but that doesn't mean you can't still make plenty of money with your money. There are other vehicles out there that aren't tied to interest rates, including index funds.What is an index fund?An index fund is a specific type of exchange traded fund that you can buy and hold in a few ways. You can choose to buy it as part of your stock portfolio in your brokerage account and hold it just like a stock, or you can use a retirement account like an individual retirement account (IRA) or 401(k) to buy and hold your index funds.Our Picks for the Best High-Yield Savings Accounts of 2024Capital One 360 Performance SavingsAPY4.25%Rate infoCircle with letter I in it.See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening.Min. to earn$0Open Account for Capital One 360 Performance SavingsOnCapital One'sSecure Website.Member FDIC.APY4.25%Rate infoCircle with letter I in it.See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening.Min. to earn$0Discover® Online SavingsAPY4.20%Min. to earn$0Open Account for Discover® Online SavingsOnDiscover Bank'sSecure Website.Member FDIC.APY4.20%Min. to earn$0American Express® High Yield SavingsAPY4.25%Rate infoCircle with letter I in it.4.25% annual percentage yield as of September 24, 2024Min. to earn$0Open Account for American Express® High Yield SavingsOnAmerican Express'sSecure Website.Member FDIC.APY4.25%Rate infoCircle with letter I in it.4.25% annual percentage yield as of September 24, 2024Min. to earn$0Index funds are extremely low-risk investments because they're designed to follow specific stock indexes, like the S&P 500 or the NASDAQ-100. These are collections of stocks for the biggest companies in the world, which makes them incredibly reliable investment vehicles.Although there's some risk of loss, unlike with a Treasury bond or a certificate of deposit, the risk is quite low. Like with government bonds, if the main components of the S&P or the NASDAQ lose all their value, we've got a much bigger economic problem than the loss of some retirement accounts.Passive income with index fundsIndex funds return passive income in two different ways, depending on how the fund is structured. Because they're bought like stocks and function like stocks, you always have the (very good) chance of making a positive return on your investment simply by buying an index fund and holding on to it for a while.But index funds also have a yield. This is kind of like interest, but is instead generated from maturing bonds and regular dividend payouts. It's all earned income, just earned in a different way.This is often smaller than what you'd get from a bank right now, but remember that the yield is only one part of the passive income from the index fund.You do have to pay for an index fund, since it's an actively managed investment. That means it's constantly being adjusted to maintain its ability to track to the index it's supposed to follow. You don't have to do anything active yourself, but companies like Vanguard and Invesco do, and they charge a tiny bit for it.Usually this is a fraction of a percent of your purchase price, so it's not a ton. But it does need to be considered when you're counting how much passive income you ultimately made.Buying and holding your index fund is the way to big passive income, though, as stated above. But let's look at how big it can be with a few examples. Remember, index fund returns are not guaranteed, though they are considered very safe and reliable investments.Index FundSept 23, 2019 Closing PriceSept 19, 2024 Closing Price5-Year % Change30-Day SEC YieldVanguard S&P 500 ETF (NYSE: VOO)$271.26$524.9193.51%1.28%Invesco QQQ Trust (NASDAQ: QQQ)$187.03$483.36158.44%0.61%Vanguard Russell 2000 Index Fund ETF (NASDAQ: VTWO)$60.79$90.5849.00%1.34%Data source: Yahoo! Finance.To put it a different way, if you had bought $1,000 of VOO five years ago, you'd have made $935.10 by doing nothing, plus the yield. Meanwhile, $1,000 of QQQ would get you $1,584.40 today. And VTWO would have earned $490 on your initial $1,000 investment.So the yield is a nice-to-have trickle of income, but when you sell your index funds, that's where the potential deluge happens.Certificates of deposit aren't the only solid bets in townCDs are high-quality investment instruments, and they have a near-zero risk of loss. But with the recent drop in the federal funds rate and more likely to come, CDs may go back to producing lackluster interest income as rates continue to shrink.Index funds, on the other hand, follow the investment markets, and although not foolproof, they do benefit from upward pressure from inflation and a growing economy. Some are certainly more risky than others, but if you choose index funds that are well diversified, you should have no problem coming out with some major income on a long-term time horizon.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"Economic Data","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2469493192"}