Archives for February 2024

Update February 2024: Save now provides a link to their actual returns for their 1-year Market Savings across all portfolios. But be careful, as much of what is shown at first glance is for products that haven’t actually completed their entire terms. You need to scroll all the way left to find numbers for products that have reached maturity and actually paid out any returns. For example, starting December 2022 and ending December 2023, or January 2023 through January 2024. Screenshot taken 2/29/24.

Update January 2024: I have updated this review with my final return numbers, along with additional details from my bank and brokerage statements. I really wish it were different, but unfortunately my experience was not unique. I have gotten a lot of messages from people who are unhappy that they received a 0% actual return on their Market Savings investments. I hope it can help prospective users make a more educated decision.

Detailed, full review:

The Save app advertises a Market Savings Account that “combines the security of FDIC-insured bank deposits with the upside potential of market returns”. I took a glance at the advertised yields (see below) and quickly filed it under “probably too good to be true”, but still came back and took a shot due to the “free” 6X leverage offered where I could invest $1,000 and get the returns of $6,000 worth of investments.

Here is a screenshot of their advertised rates, taken 2/29/24:

A short theoretical story. Let’s say you have $1,000 and put it into a 1-year CD at an FDIC-insured bank that pays 5% APY. At the end of the year, you’d have $1,050 guaranteed. Now, imagine you went to Vegas and instead bet that $50 interest on red at the roulette table. Worst-case, you’d lose the $50 and still have $1,000. Best-case, you’d double the $50 and end up with $1,100. A 10% annual return! Now, you might charge a fee to others for this “service”. Nothing if they lose, but a little cut if they win. So $1,000 worst-case, and $1,096 if they win ($4 fee for the service).

This gives you a basic idea of what I imagined was going on here, except replace Vegas with some fancy derivatives to give you market exposure to a portfolio of stocks and bonds.

The longer Save version. Here it is, straight from Save:

Every Save® account is connected with a FDIC-insured bank account. Your deposits are never at risk. We only invest the interest on your deposits, so no matter what happens with the ups and downs of the markets, your initial deposit is never at risk for investment loss.

This app is a combination of an FDIC-insured bank account, an SIPC-insured brokerage account, and an SEC-registered investment advisor. Your money is placed into an FDIC-insured account at Webster Bank that doesn’t earn any interest. Instead of paying you interest, they will buy a portfolio of securities that offer exposure to market products like stocks and bonds. These securities are held in a brokerage account with Apex Clearing, the same firm used by brokers like Robinhood, WeBull, etc. As your financial advisor, they will charge you a fee of 0.35% annually for this service. Ex. 0.35% of $1,000 is $3.50 a year. 0.35% of $10,000 is $35 a year.

This is all taken from Save’s official documents: press release, terms and conditions, SEC Form ADV, deposit agreement, and Form CRS.

Upon opening Market Savings and initiating a deposit to the Deposit Account, Save will, on behalf of you:

– deposit your funds in full into the Deposit Account provided by Webster, member FDIC and,
– purchase a strategy–linked security selected based on your risk tolerances within a Client Account

The Market Savings Product is comprised of a Deposit Account with Webster Bank, N.A. and a Client Account with Apex Clearing Corporation.

SAVE Advisers is an investment adviser registered with the SEC. SAVE Advisers provides its clients with combined banking products and wealth management services through a web-based algorithmically driven wrap-fee investment advisory program (the “SAVE Market Savings Wrap Program”).

The SAVE Market Savings Wrap Program is designed for investors with a cash savings investment profile. The investment objective of the SAVE Market Savings Wrap Program is to enhance our clients’ cash savings investment profile by providing attractive returns on capital using Save’s core investment philosophy while preserving their initial investment.

On the Market Savings Wrap Program, Clients will pay a wrap fee at a rate of 35 basis points (0.35%) per annum (one basis point is 1/100 of 1%) on either 1.) the total notional amount of each strategy–linked security or 2.) the total notional value of the Client Deposit Account (whichever is greater).

Save products are intended for conservative investors who are mostly concerned about the protection of their principal investments.

This reminds me of the No Risk Portfolio with 100% Money Back Guarantee. Your market-linked investment may go up 10%, 100%, or whatever, but the worst thing that can happen is it goes to zero (and you still get back your initial investment). According to this WSJ article (paywall), the CEO says the chance of a zero return in any given year is about 15%. This suggests that they are using some sort of leverage. (They also say the returns will count as long-term capital gains, unlike ordinary bank interest.)

The investments in Save portfolios are held for over a year so they are taxed as long-term capital gains.

This reminds me of the structured investments and “equity-linked returns with no downside” offered by many insurance companies. The insurance companies have much more onerous early withdrawal penalties where you can lose more than your initial principal, so this seems like a much lower cost option (even if still not what I want for my primary portfolio).

Where do they get those high advertised returns? Those are back-tested numbers:

Average annual returns are based on hypothetical back-tested performance by Save of the Save Moderate Portfolio from 2006 to present.

What happens if I try to withdraw my investment before the end of my term? There is a early withdrawal fee (a slightly complicated formula), but you’ll always at least get back your initial principal.

I understand that if I terminate my account prior to the completion of an investment term I may forgo all gains and receive back only my initial deposit.

Update: My final results from December 2022 to December 2023. I deposited $1,000 in December 2022, and ended up with… $1,000 in December 2023. I got back my initial $1,000 and that was it. All of the other investments apparently matured at a value of zero. This is despite having been told that I had positive returns in the middle of my term.

After my initial sign-up and $1,000 investment of my own money in December 2022, I did later participate in Save’s referral program and that did later result in additional earnings (my earnings were the same as the referred earnings). If you count this money, then I received a positive return. However, I don’t feel that this is representative of what you (the reader) could necessarily achieve on your own, so I chose to focus only on what I would have gotten without the ability to refer other users. I simply count the $1,000 of my own money and the $5,000 equivalent balance invested due to using someone else’s referral. On that money, my return was the same as everyone else who invested in my portfolio from December 2022 to December 2023: zero.

Save’s referral program is structured in that I earn the same bonus as the reader that signed up. Thus, you can see the returns of every single reader that used me as their referral (thanks again if you did!). I have gone ahead and attached the screenshot of every single referral that I have made with a matured investment, as of the end of March 2024. These are real-world results from real readers. The return percentages are usually based on a $5,000 equivalent investment (i.e. 1% return on $5,000 is $50.)

People with different start times and end times have different returns. Some have had zero returns. Some have had positive returns. The more recent returns are higher, and I hope that they continue to rise. However, I don’t count my chickens until they have hatched (fully matured and paid back any principal and interest).

That was a lot, but now you have all my returns and all the matured returns from all referred readers, down to the penny.

Save did put my initial $1,000 in an FDIC-insured bank account and just kept it there – nice and safe – doing absolutely nothing. No interest was earned. Each month, I got a bank statement and a brokerage statement. Here is a screenshot of my final bank statement showing $1,000 being sent back to me at the end of December 2023, after 12 months.

Below is a screenshot from my Save Brokerage statement, which was indeed held at Apex Clearing (a popular clearing firm for many fintechs, used by Robinhood, etc). Inside, they bought some sort of non-transparent, thinly-traded securities that were classified as corporate bonds. Perhaps someone with more advanced market knowledge can tell me more about these things. Example CUSIPs were 05600HTU9 and 05600H2F1.

Here is a tiny of bit info from FINRA:

The value of this security varied wildly through the year, from zero to $1 and all the way back to apparently zero?

How much of this security did they buy? In my case, it was about $15 worth per $1,000 invested. In comparison, earning 4% APY from a 1-year $1,000 traditional bank CD would equal $40.

I did sign up using a referral link and deposited $1,000 to qualify for the bonus $5,000 (at the time, lower now) for a total equivalent balance of $6,000. I thought this would be a good value bet, effectively leveraging any returns. Unfortunately, zero times anything is still… zero. I just got back my $1,000. Again, this excludes any referral bonus income.

Now, I knew that a zero return was possible. A screenshot of the portfolio strategy that I picked initially is shown below. However, nearly every major asset class had solid positive returns for 2023. Yet, according to Save’s own historical returns page (see top of post), the highest return for any of their multiple portfolios that were held from both (December 2022 to December 2023) or (January 2023 to January 2024) was 1.20%, with the median return being zero. I’m afraid that I simply don’t understand what is inside the securities that they chose to buy, so I will not be investing anything further.

Honestly, I had high hopes for this product. It had potential and it didn’t even have to be that complicated. Again, look at this simple DIY principal-guaranteed investment linked to market returns.

Bottom line. The Save app advertises to folks “higher returns on their savings without the risks of the stock market.” They do appear to keep your principal safe in an FDIC-insured account, so indeed you can’t technically lose money. But it is unclear to me how they invest the rest. Despite their advertised 1-year return numbers, my personal experience was zero return (0.00%) on my 1-year term Market Savings investment that ran from December 2022 to December 2023. This matches their published actual returns for all investors during this time frame. This numbers excludes subsequent income from referral bonuses, which if you did include, would have resulted in a positive return. Other maturities may have experienced different returns, as shown in the screenshots above. I did receive my initial principal back as promised.

Note: Save Advisers pays a Referral Bonus up to $5000/$10,000 [product specific] as more specifically described in the current Referral Program as outlined by the Advisor here: https://joinsave.com/referrals, for each successful client referral. This amount is subject to change at any time.

Here’s my monthly roundup of the best interest rates on cash as of February 2024, roughly sorted from shortest to longest maturities. There are often lesser-known opportunities available to individual investors, where you could earn a lot more money while keeping the same level of safety by moving to another FDIC-insured bank or NCUA-insured credit union. Check out my Ultimate Rate-Chaser Calculator to see how much extra interest you could earn from switching. Rates listed are available to everyone nationwide. Rates checked as of 2/5/2024.

TL;DR: Mostly minor movements. Still 5%+ savings accounts and short-term CDs, but no more 5-year CDs at 5% APY. Compare against Treasury bills and bonds at every maturity, taking into account state tax exemption.

Fintech accounts
Available only to individual investors, fintech companies often pay higher-than-market rates in order to achieve fast short-term growth (often using venture capital). “Fintech” is usually a software layer on top of a partner bank’s FDIC insurance.

• 5.32% APY ($1 minimum). Raisin lets you switch between different FDIC-insured banks and NCUA-insured credit unions easily without opening a new account every time, and their liquid savings rates currently top out at 5.32% APY. See my Raisin review for details. Raisin does not charge depositors a fee for the service.
• 5.36% APY (before fees). MaxMyInterest is another service that allows you to access and switch between different FDIC-insured banks. You can view their current banks and APYs here. As of 12/6/23, the highest rate is from Customers Bank at 5.36% APY. However, note that they charge a membership fee of 0.04% per quarter, or 0.16% per year (subject to $20 minimum per quarter, or $80 per year). That means if you have a $10,000 balance, then $80 a year = 0.80% per year. This service is meant for those with larger balances. You are allowed to cancel the service and keep the bank accounts, but then you may lose their specially-negotiated rates and cannot switch between banks anymore.

High-yield savings accounts
Since the huge megabanks STILL pay essentially no interest, everyone should have a separate, no-fee online savings account to piggy-back onto your existing checking account. The interest rates on savings accounts can drop at any time, so I list the top rates as well as competitive rates from banks with a history of competitive rates and solid user experience. Some banks will bait you with a temporary top rate and then lower the rates in the hopes that you are too lazy to leave.

• The top rate at the moment is at Milli (app only) at 5.50% APY. BrioDirect at 5.35% APY. CIT Platinum Savings at 5.05% APY with $5,000+ balance.
• SoFi Bank is now up to 4.60% APY + up to $325 new account bonus with direct deposit. You must maintain a direct deposit of any amount each month for the higher APY. SoFi has historically competitive rates and full banking features. See details at $25 + $300 SoFi Money new account and deposit bonus.
• Here is a limited survey of high-yield savings accounts. They aren’t the highest current rate, but historically have kept it relatively competitive and I like to track their history.

Short-term guaranteed rates (1 year and under)
A common question is what to do with a big pile of cash that you’re waiting to deploy shortly (plan to buy a house soon, just sold your house, just sold your business, legal settlement, inheritance). My usual advice is to keep things simple and take your time. If not a savings account, then put it in a flexible short-term CD under the FDIC limits until you have a plan.

• No Penalty CDs offer a fixed interest rate that can never go down, but you can still take out your money (once) without any fees if you want to use it elsewhere. Raisin has a 5-month No Penalty CD at 5.36% APY with $1 minimum deposit and 30-day minimum hold time. CIT Bank has a 11-month No Penalty CD at 4.90% APY with a $1,000 minimum deposit. Ally Bank has a 11-month No Penalty CD at 4.25% APY for all balance tiers. Marcus has a 13-month No Penalty CD at 4.70% APY with a $500 minimum deposit. Consider opening multiple CDs in smaller increments for more flexibility.
• Lafayette Federal Credit Union has a 1-year certificate at 5.56% APY ($500 min). They also have jumbo certificates with $100,000 minimums at even higher rates, but a harsh 180-day penalty if you withdraw your CD funds before maturity. Anyone can join this credit union via partner organization ($10 one-time fee).
• CIBC Agility Online has a 12-month CD at 5.51% APY. Reasonable 30-day penalty if you withdraw your CD funds before maturity.

Money market mutual funds + Ultra-short bond ETFs
Many brokerage firms that pay out very little interest on their default cash sweep funds (and keep the difference for themselves). Note: Money market mutual funds are highly-regulated, but ultimately not FDIC-insured, so I would still stick with highly reputable firms. I am including a few ultra-short bond ETFs as they may be your best cash alternative in a brokerage account, but they may experience losses.

• Vanguard Federal Money Market Fund is the default sweep option for Vanguard brokerage accounts, which has an SEC yield of 5.28% (changes daily, but also works out to a compound yield of 5.41%, which is better for comparing against APY). Odds are this is much higher than your own broker’s default cash sweep interest rate.
• The PIMCO Enhanced Short Maturity Active Bond ETF (MINT) has a 5.39% SEC yield and the iShares Short Maturity Bond ETF (NEAR) has a 5.15% SEC yield while holding a portfolio of investment-grade bonds with an average duration of ~6 months.

Treasury Bills and Ultra-short Treasury ETFs
Another option is to buy individual Treasury bills which come in a variety of maturities from 4-weeks to 52-weeks and are fully backed by the US government. You can also invest in ETFs that hold a rotating basket of short-term Treasury Bills for you, while charging a small management fee for doing so. T-bill interest is exempt from state and local income taxes, which can make a significant difference in your effective yield.

• You can build your own T-Bill ladder at TreasuryDirect.gov or via a brokerage account with a bond desk like Vanguard and Fidelity. Here are the current Treasury Bill rates. As of 2/5/24, a new 4-week T-Bill had the equivalent of 5.39% annualized interest and a 52-week T-Bill had the equivalent of 4.64% annualized interest.
• The iShares 0-3 Month Treasury Bond ETF (SGOV) has a 5.17% SEC yield and effective duration of 0.10 years. SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) has a 5.24% SEC yield and effective duration of 0.08 years.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. If you redeem them within 5 years there is a penalty of the last 3 months of interest. The annual purchase limit for electronic I bonds is $10,000 per Social Security Number, available online at TreasuryDirect.gov. You can also buy an additional $5,000 in paper I bonds using your tax refund with IRS Form 8888.

• “I Bonds” bought between November 2023 and April 2024 will earn a 5.27% rate for the first six months. The rate of the subsequent 6-month period will be based on inflation again. More on Savings Bonds here.
• In mid-April 2023, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will have another post up at that time.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with unique risks. You have to jump through certain hoops which usually involve 10+ debit card purchases each cycle, a certain number of ACH/direct deposits, and/or a certain number of logins per month. If you make a mistake (or they judge that you did) you risk earning zero interest for that month. Some folks don’t mind the extra work and attention required, while others would rather not bother. Rates can also drop suddenly, leaving a “bait-and-switch” feeling.

• OnPath Federal Credit Union pays 7.00% APY on up to $10,000 if you make 15 debit card purchases, opt into online statements, and login to online or mobile banking once per statement cycle. Anyone can join this credit union via $5 membership fee to join partner organization. You can also get a $100 Visa Reward card when you open a new account and make qualifying transactions.
• Credit Union of New Jersey pays 6.00% APY on up to $25,000 if you make 15 debit card purchases, opt into online statements, and make at least 1 direct deposit, online bill payment, or automatic payment (ACH) per statement cycle. Anyone can join this credit union via $5 membership fee to join partner organization.
• Pelican State Credit Union pays 6.05% APY on up to $20,000 if you make 15 debit card purchases, opt into online statements, log into your account at least once, and make at least 1 direct deposit, online bill payment, or automatic payment (ACH) per statement cycle. Anyone can join this credit union via partner organization membership.
• Orion Federal Credit Union pays 6.00% APY on up to $10,000 if you make electronic deposits of $500+ each month (ACH transfers count) and spend $500+ on your Orion debit or credit card each month. Anyone can join this credit union via $10 membership fee to partner organization membership.
• All America/Redneck Bank pays 5.30% APY on up to $15,000 if you make 10 debit card purchases each monthly cycle with online statements.
• Find a locally-restricted rewards checking account at DepositAccounts.

Certificates of deposit (greater than 1 year)
CDs offer higher rates, but come with an early withdrawal penalty. By finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider building a CD ladder of different maturity lengths (ex. 1/2/3/4/5-years) such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account. When one CD matures, use that money to buy another 5-year CD to keep the ladder going. Some CDs also offer “add-ons” where you can deposit more funds if rates drop.

• Library Of Congress Federal Credit Union has a 60-month CD at 4.84% APY with $500 minimum. Shorter terms are pretty competitive as well: 4-year at 4.89% APY. 3-year at 5.25% APY. 2-year at 5.20% APY. 1-year at 5.35% APY. The early withdrawal penalty for the 5-year is 180 days of interest. Anyone can join this credit union via partner organization.
• BMO Alto has a 5-year CD at 4.60% APY. 4-year at 4.60% APY. 3-year at 4.60% APY. 2-year at 4.75% APY. 1-year at 5.30% APY. No minimum. The early withdrawal penalty (EWP) for CD maturities of 1 year or more is 180 days of interest. For CD maturities of 11 months or less, the EWP is 90 days of interest. Note that they reserve the right to prohibit early withdrawals entirely. Online-only subsidiary of BMO Bank.
• You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. You may need an account to see the rates. These “brokered CDs” offer FDIC insurance and easy laddering, but they don’t come with predictable early withdrawal penalties. Right now, I see a 5-year non-callable CD at 4.10% APY (callable: no, call protection: yes). Be warned that now both Vanguard and Fidelity will list higher rates from callable CDs, which importantly means they can call back your CD if rates drop later.

Longer-term Instruments
I’d use these with caution due to increased interest rate risk, but I still track them to see the rest of the current yield curve.

• Willing to lock up your money for 10 years? You can buy long-term certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer FDIC insurance, but they don’t come with predictable early withdrawal penalties. You might find something that pays more than your other brokerage cash and Treasury options. Right now, I see a 10-year CDs at [n/a] (callable: no, call protection: yes) vs. 4.16% for a 10-year Treasury. Watch out for higher rates from callable CDs where they can call your CD back if interest rates drop.

All rates were checked as of 2/5/2023.

Photo by micheile henderson on Unsplash