Of all the Excel models, investing concepts, cash flow theories presented on Dividends4Life, none have been as misunderstood or caused more confusion than the money market account (MMA) rate. I have received many comments and emails inquiring about the rate. Most went something like "4.61%, are you out of your mind? Would you tell me where you found a MMA paying 4.61%?"
Inherently, financial valuations are forward looking. Unfortunately, the only hard data we have is historic, interest rates included. Theoretically, the MMA rate that I use is intended to represent the MMA rate that will be earned over then next 20 years. So how did I come up with the 4.61% that is currently being used?
I started the year at 5.11%, which was the rate that my highest MMA was paying. Then as rates began to fall I averaged the 5.11% with the current rate, limiting the change (plus or minus) to 0.5%, thus 5.11% - 0.5% = 4.61%. Given where rate are, this will not likely change this year.
What appears to be (and actually is) a 2-year MMA rate average that really should be 20-year projected rate really isn't that far off. I validate the rate by comparing it to the 20-year U.S. Treasury rate, which ironically was exactly 4.61% on August 1, 2008.
I don't really expect this will stop the questions and comments about my MMA Rate, but I now I have a post that I can point to to help explain what is happening.
(Photo: gerard79)
Related Articles:
________________________________________________________________
Subscribe to:
Post Comments (Atom)
Popular Posts Last 30 Days
-
There are some dividend aristocrats which have not only maintained but increased their dividends for over half a century. Having survived ev...
-
If you want to earn more dividend income from the stock market, then you need to start investing in healthcare. Analysts project the number ...
-
Showing resilience during a tough week was a group of stocks that has not been heard from much in the past two years. A group that has been ...
-
High dividend yields are harder to find lately, given the long-running stock market rally. But that scarcity doesn't mean investors have...
-
One little-known tax loophole allows Americans to collect large, growing distribution checks from the government. And investors can begin ea...
-
Every investor needs a security blanket -- that piece of the portfolio that needs no attention and doesn't keep you up at night. Busines...
-
The U.S. boosted tariffs on $200 billion worth of Chinese goods from 10% to 25%. The markets had expected this to be the week that this deal...
-
I love buying dollar bills for $0.80. Of course, you don’t find many chances like that in the stock market. Whenever such a great deal arise...
-
Technology is the alchemy of the stock market. It is where companies turn worthless silicon into incredible new and expensive gizmos and dev...
-
The one knock against this midstream company is its higher risk profile compared with its peers. It has been working to address that issue b...
0 comments
Post a Comment
Post a Comment