4 ms·

And not one intelligent person is asking, how is the bank giving me a return for seemingly nothing? HYSA investments are wildly irresponsible and risky. They d

by hatch7 3y ago

And not one intelligent person is asking, how is the bank giving me a return for seemingly nothing? HYSA investments are wildly irresponsible and risky. They degrade the financial system and support horrible practices and institutions. I challenge anyone to find ONE financial instution which discloses what HYSA is invested in. These aren't even good investments. VTI is up 25% y/y. With these "high interest" investments below the prime rate, you're literally guaranteed to lose money, all while taking a massive and unncessary risk.

erehweb 3y ago
Where's the risk. It's FDIC insured, no?
- hatch7 3y ago
  [flagged]
somehnguy 3y ago
Since when are High Yield Savings Accounts investments? They're FDIC insured bank accounts and inherently (essentially!) zero risk.
- hatch7 3y ago
  The point is they're not zero risk. You are safer investing your money into an index fund ETF. And if you consider them safe, then accept my challenge to find a bank which discloses what HYSA is invested in. Or better yet, do the research yourself and prepare to be amazed and disgusted to see how the proverbial sausage is made. And to the person clamoring on about FDIC insurance, I also invite to look up how many deposits it actually covers, while reiterating that they still have not yet found a single bank which discloses what HYSA investments are in. The Wealthfront reply is on to something, by finding an article which alludes to mysterious "banks" your money is lent to. Do more research about those "banks" are, though. It's not at all what you think.
  - ezfe 3y ago
    Lol what? A HYSA is lower risk than an index fund because it's FDIC insured.
  - cj 3y ago
    Challenge accepted. Wealthfront: https://www.wealthfront.com/blog/cash-account-apy/ https://www.wealthfront.com/blog/cash-account-apy/ https://www.wealthfront.com/blog/wealthfront-isnt-a-bank/ https://www.wealthfront.com/blog/wealthfront-isnt-a-bank/ (See section #2) > Because we broker our deposits, we’re able to offer you access to wholesale interest rates — the interest rates that banks offer to broker-dealers like Wealthfront for deposits, which can be higher than the rates banks offer individual customers. When our partner banks pay a high rate on your deposits, we pass along a high rate to you. TLDR: Wealthfront gives your money to other banks who pay Wealthfront interest which is passed on to you. All FDIC insured.
  - torstenvl 3y ago
    How many times has the stock market seen major losses over the past 90 years? How many times have FDIC-insured accounts seen major losses over the past 90 years?
mattgreenrocks 3y ago
HYSA has always been the place for emergency funds for me. Very different from an investment. Do people use HYSAs for investing?
carlosjobim 3y ago
They lend your money out to other people paying a higher interest. In fact, they lend your money out several times. Even if your bank pays 0% interest, they are lending your money out many times over to people who pay the bank interest.
- hatch7 3y ago
  [flagged]
- carlosjobim 3y ago
  Reply to the poster below me, who was censored for some reason: AFAIK the money that people have in their bank accounts are used as reserves for all loans the banks give. I don't know of any separation of funds.
cj 3y ago
> These aren't even good investments. VTI is up 25% y/y. It's easy to say this today, but a year ago today the majority of "experts" were saying we were heading for a recession (which never materialized). It was anyone's guess whether VTI would have been higher or lower y/y.
HumblyTossed 3y ago
Haha, you do you, man. And good luck to you.
- deleted 3y ago
  [deleted]
mmiyer 3y ago
The bank gets 5.4% from the federal government.[1] HYSA rates closely track the federal funds rate, because the banks are essentially passing on the fed funds rate to consumers (minus a cut for themselves). The bank can also get 5.3% from short term treasuries right now. So the answer is basically that the federal reserve is giving the return. 1. https://www.federalreserve.gov/monetarypolicy/reserve-balances.htm https://www.federalreserve.gov/monetarypolicy/reserve-balanc...
- hatch7 3y ago
  This is hilarious. You actually think the Fed is paying everyone's HYSA yields? So, let me get this straight, you actually believe "Customers Bank", for example, which is currently offering 5.32%, is going through all the trouble of investing your money to get a 0.08% return from the same? Or is it possible these HYSA institutions are investing your money into other, more risky investments, like foreign banks, for example? Again, I have to wonder and ask, why has no intelligent person done the due dilligence to find out what their money is invested in for such a generous return, as they should for any other financial vehicle? Literally not one person in this entire post can provide evidence of what their bank invests HYSA funds in. This is how financially illiterate we are.

by hatch7 3y ago

erehweb 3y ago

Where's the risk. It's FDIC insured, no?

hatch7 3y ago
[flagged]

somehnguy 3y ago

Since when are High Yield Savings Accounts investments? They're FDIC insured bank accounts and inherently (essentially!) zero risk.

hatch7 3y ago
The point is they're not zero risk. You are safer investing your money into an index fund ETF. And if you consider them safe, then accept my challenge to find a bank which discloses what HYSA is invested in. Or better yet, do the research yourself and prepare to be amazed and disgusted to see how the proverbial sausage is made. And to the person clamoring on about FDIC insurance, I also invite to look up how many deposits it actually covers, while reiterating that they still have not yet found a single bank which discloses what HYSA investments are in. The Wealthfront reply is on to something, by finding an article which alludes to mysterious "banks" your money is lent to. Do more research about those "banks" are, though. It's not at all what you think.
- ezfe 3y ago
  Lol what? A HYSA is lower risk than an index fund because it's FDIC insured.
- cj 3y ago
  Challenge accepted. Wealthfront: https://www.wealthfront.com/blog/cash-account-apy/ https://www.wealthfront.com/blog/cash-account-apy/ https://www.wealthfront.com/blog/wealthfront-isnt-a-bank/ https://www.wealthfront.com/blog/wealthfront-isnt-a-bank/ (See section #2) > Because we broker our deposits, we’re able to offer you access to wholesale interest rates — the interest rates that banks offer to broker-dealers like Wealthfront for deposits, which can be higher than the rates banks offer individual customers. When our partner banks pay a high rate on your deposits, we pass along a high rate to you. TLDR: Wealthfront gives your money to other banks who pay Wealthfront interest which is passed on to you. All FDIC insured.
- torstenvl 3y ago
  How many times has the stock market seen major losses over the past 90 years? How many times have FDIC-insured accounts seen major losses over the past 90 years?

mattgreenrocks 3y ago

HYSA has always been the place for emergency funds for me. Very different from an investment. Do people use HYSAs for investing?

carlosjobim 3y ago

They lend your money out to other people paying a higher interest. In fact, they lend your money out several times. Even if your bank pays 0% interest, they are lending your money out many times over to people who pay the bank interest.

hatch7 3y ago
[flagged]
carlosjobim 3y ago
Reply to the poster below me, who was censored for some reason: AFAIK the money that people have in their bank accounts are used as reserves for all loans the banks give. I don't know of any separation of funds.

cj 3y ago

> These aren't even good investments. VTI is up 25% y/y. It's easy to say this today, but a year ago today the majority of "experts" were saying we were heading for a recession (which never materialized). It was anyone's guess whether VTI would have been higher or lower y/y.

HumblyTossed 3y ago

Haha, you do you, man. And good luck to you.

deleted 3y ago
[deleted]

mmiyer 3y ago

The bank gets 5.4% from the federal government.[1] HYSA rates closely track the federal funds rate, because the banks are essentially passing on the fed funds rate to consumers (minus a cut for themselves). The bank can also get 5.3% from short term treasuries right now. So the answer is basically that the federal reserve is giving the return. 1. https://www.federalreserve.gov/monetarypolicy/reserve-balances.htm https://www.federalreserve.gov/monetarypolicy/reserve-balanc...

hatch7 3y ago
This is hilarious. You actually think the Fed is paying everyone's HYSA yields? So, let me get this straight, you actually believe "Customers Bank", for example, which is currently offering 5.32%, is going through all the trouble of investing your money to get a 0.08% return from the same? Or is it possible these HYSA institutions are investing your money into other, more risky investments, like foreign banks, for example? Again, I have to wonder and ask, why has no intelligent person done the due dilligence to find out what their money is invested in for such a generous return, as they should for any other financial vehicle? Literally not one person in this entire post can provide evidence of what their bank invests HYSA funds in. This is how financially illiterate we are.