Episode summary
Dylan Jovine | Is Your Bank "Scamming" You?
Summary
Dylan Jovine argues that keeping cash in traditional savings accounts is still one of the biggest investing mistakes people make, regardless of age. He says the Federal Reserve held rates steady at 3 and 1/2 to 3 and 3/4, but banks and high-yield savings providers like Capital One, Synchrony Financial, Marcus by Goldman Sachs, and Ally Financial have still been lowering APYs.
He contrasts those yields with the near-zero rates at Bank of America and JPMorgan, saying inflation around 3% means money in a bank account is losing purchasing power. His preferred alternative is a short-term Treasury money market fund such as Schwab Treasury Money Market Fund, ticker SNOXX, which he says yields around 3.4% and invests only in short-term U.S. government debt.
Jovine frames the choice as a practical response to currency depreciation: park cash where it can at least keep up with inflation while waiting for better investments. He says the approach is safer than a bank in his view because it is backed by short-duration U.S. government obligations and pays income monthly.
Key takeaways
- Dylan Jovine says the biggest mistake is leaving cash in a savings account that barely pays interest.
- He says Bank of America and JPMorgan pay 0.01%, which is far below inflation around 3%.
- Jovine recommends Schwab Treasury Money Market Fund, SNOXX, as a cash parking place yielding about 3.4%.
- He argues short-term Treasury money market funds reduce volatility because they hold under-one-year U.S. government debt.
- Jovine’s core point is that cash should at least keep pace with inflation while investors wait for opportunities.
Notable quotes
“I see people of all ages making this mistake all the time, and it really blows my mind”
“I see lots of folks that make the mistake of keeping their money in a savings account”
“My point is, inflation is at least 3%. So, think about it”
“I recommend, and I've recommended this a dozen times here on this the channel, but Schwab Treasury Money Market Fund”
“So, it's really buying from the US government with short durations, which means remember something, duration is time”
How the episode opens
Good morning. This is Dylan Jovineaux behind the markets. Happy Monday.
Today is Monday, May the 4th. May the 4th be with you for those of you, like me, nerds who celebrate that little ridiculous self-made holiday. Anyway, today I'd like to talk about one of my favorite things to talk about, honestly.
And I talk about it, for those of you who've been watching this for years, know that I talk about this once every, I don't know, 3 months, but I really have to do it again. Really, it's like one of the top investing blunders that people make at any age, whether you're 30, whether you're 40, whether you're 50, whether you're 60, whether you're 70, whether you're 80. I see people of all ages making this mistake all the time, and it really blows my mind.
So, I feel I have a responsibility to bring this up and ring the bell once every few months. So, anyway, on Wednesday, the Federal Reserve kept rates basically steady, 3 and 1/2 to 3 and 3/4. And basically, the Fed rate basically drives yields on products, lots of products, savings accounts, CDs, short-term T-bills, money market funds, etc., etc.
A whole bunch of things. But, Fed funds have stayed steady. The Federal Reserve kept it steady.
But, guess what? That's not the way private companies do things. They can ignore that if they want.
So, literally, it in days, basically, a few companies, let's see here, Capital One, Synchrony Financial, Marcus by Goldman Sachs, and Ally Financial recently have dropped the APYs on their high-yield savings accounts. Anyway, so, Fed keeps it same, these guys pay you less. Isn't that interesting?
It used to be that bank savings accounts mimicked what the Fed did. The Fed raised rates, they raised rates in lockstep.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- bank deposit rates
- treasury money market funds
- inflation erosion
- federal reserve rates
- cash management
Companies and tickers mentioned
- COF
- SYF
- GS
- ALLY
- BAC
- JPM
- SCHW
- Capital One
- Synchrony
- Goldman Sachs
- Ally Financial
- Bank of America
- JPMorgan Chase
- Charles Schwab
Watch the episode
Watch “Dylan Jovine | Is Your Bank "Scamming" You?” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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