When cash beats stocks
High-yield savings accounts and certificates of deposit (CDs) suit money you'll need within 1–3 years. Principal is FDIC-insured up to $250k per depositor per bank, and yields in the 4–5% range (as of 2024) often beat short-duration bond funds on a risk-adjusted basis.
Use cash for your emergency fund (3–6 months of expenses), upcoming down payments, and tax-due reserves. Don't use it for retirement money you won't touch for 20+ years — inflation will erode purchasing power.
APY vs APR
APR is the simple annual rate; APY includes the effect of compounding. A 4.9% APR compounded monthly yields about 5.01% APY. Always compare deposit products on APY and loans on APR.
CD laddering strategy
Instead of locking everything into a 5-year CD, split into 1, 2, 3, 4 and 5-year CDs. Each year one matures — reinvest at the prevailing 5-year rate. You capture long-rate yields while keeping yearly liquidity.