Joe Pinsker
speaker
1,247 appearances
30 recordings
1 series
first heard Oct 2022
last heard Jan 2025
Joe Pinsker’s voice in public audio — every appearance, attributed to the second.
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Appearances
And the same is true for yields on high yield savings accounts, some of which have been paying 5% or even a little bit more.
And the yields on those are expected to drop.
It could be within days or weeks of a rate cut, though there's going to be some variance from bank to bank.
Meanwhile, for certificates of deposit or CDs, rates actually already fell a bit in anticipation of a rate cut and are expected to continue declining after the Fed's announcement if they cut rates as expected.
This isn't going to be an enormous drop-off, like it's falling off a cliff.
It's more expected to be slower and more gradual.
So if you're thinking about what to do with your cash, it's not like things change immediately overnight, but it still is sort of sooner the better if you're going to think of doing something differently.
I was talking with a financial advisor in Milwaukee named Ben Smith, who was saying there are two things that he watches out for in moments like this.
And interestingly, these two things are pulling people in opposite directions.
The first thing that he warns against is the temptation to chase higher returns by buying stocks in a moment like this.
Basically, people get used to earning high returns on their cash.
And they want to continue that and extend that and preserve that into the future, even as yields are going down on cash.
But looking to stocks for that sort of yield can be risky if you're doing it on a short time horizon.
And the second impulse, which kind of pulls people in the other direction, is just that they've gotten so used to high returns on cash that they might just keep clinging to it even as the yields drop.
The way that Ben Smith was talking about this was that people have been trained to view high-yield savings accounts as a basic fact of investing, and it's a little bit hard just to retrain your brain.
Yeah, getting a high return on your cash has felt awesome the past couple of years to a lot of people.
But the reality of investing is that the returns on cash are never really going to be the thing that's going to make you wealthy.
So you really just want to make sure you just have as much cash as you need.
And the way that financial advisors typically think about that is having enough cash
in case of an emergency to cover up several months expenses.
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