Jason Zweig
speaker
906 appearances
17 recordings
1 series
first heard Jan 2018
last heard Sep 2022
Jason Zweig’s voice in public audio — every appearance, attributed to the second.
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It's a yield that the fintech company is generating by buying stocks, mutual funds, ETFs, and basically taking greater risks in order to earn those potentially higher returns.
Well, if you put your money in a traditional bank in the U.S., you get your deposit insured up to $250,000 per account by the Federal Deposit Insurance Corporation, the FDIC, which means that basically the U.S.
government is ensuring that
You won't lose money on your deposit, even if the bank goes bust.
And as a general rule with these fintechs, you either don't get that guarantee or you get a modified form of it.
A lot of these fintech startups are not regulated as banks per se.
And that gives them somewhat more freedom since they're not subject to all the same regulations as traditional banks.
They can take more risks and they can take different kinds of risks than traditional banks customarily will with deposits.
And that's a large part of where these high yields come from.
There's a very old quip.
I'm more concerned about the return of my money than I am about the return on my money.
And of course, if you put your cash in a savings account at a traditional bank...
you know that the return of your money is assured because the federal government guarantees it.
If you go with one of these fintechs, that may not always be the case.
Some of these fintechs either imply or state that they're committed to these rates and the high rates they're offering can sound a lot like a promise or a guarantee.
And, you know, when bank savings companies
accounts are yielding, you know, well under 1%, just a fraction of it, you should approach yields of 3% to 4% to 5% and higher with a lot of skepticism because the fintech generating that is doing something that banks can't and won't do.
And you need to understand that before you commit your money.
Well, the response varies quite a bit depending on the strategies that they're implementing.
I mean, in some cases, it really is just the word of the fintech startup behind an implicit promise to give you your full principal back.
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