'Resting' money still merits interest


Q: My broker handled the purchase for me of a one-year certificate of deposit that matured on Aug 4, 1994. I instructed him to renew that CD along with the accumulated interest.

The subsequent monthly statement showed the new CD taking effect on Aug. 10, 1994 -- six days later. My broker said this is proper procedure. I think I was cheated out of six days' interest. What is your opinion?

A: The brokerage firm had your money on Aug. 4, 1994. However, since CD purchases usually settle on just one day of the week (often Wednesday), the new CD was dated Aug. 10, 1994. This is normal procedure.

What the broker should have done was put your money into a money market account for six days. At least that way, you would have gotten interest while your money was "resting."

A growing number of brokerage firms currently have automatic "sweep" features that transfer any idle cash into a money market fund on a daily basis. However, even if your broker doesn't have access to this convenience, he should be watching the client's uninvested cash position. Amounts over $1,000 should definitely put to work, even on a temporary basis.

At today's money market rates of about 4 percent per year, each $1,000 would earn about 11 cents per day or 66 cents for the six days.

You don't state the amount of your CD. If it was $1,000, I wouldn't work too hard to chase 66 cents, the interest due you. But for a $50,000 investment (or about $33 interest for the six days), I would follow up.

To get this six days' interest, I suggest you ask your broker to credit your account for the lost daily interest. If that doesn't work, write a letter to the branch manager with copies to the customer complaint andcompliance departments.

Rating mutual funds

Forbes magazine has completed its 39th annual mutual fund rating survey. The results are published in the Aug. 29 issue, which should be on newsstands until mid-September.

This survey ranks the performance of more than 1,800 funds over the last three complete market cycles. Although historical performance alone does not impart much information, rating the up-market and down-market performance tells a lot about a fund's ability to protect assets during bad times and take advantage of opportunities in good times.

The annual fund survey is thorough, and the accompanying articles are useful.

Susan Bondy founded her namesake financial services company 1980 to provide financial planning and asset management. She is a frequent guest on "Good Morning America," the "Today Show" and National Public Radio. Write to Susan Bondy in care of The Sun, 501 N. Calvert St., Baltimore, Md. 21278. Letters will be confidential.

Copyright © 2020, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad