Does this scheme work for double-earning on stock market growth + high interest savings?
Suppose I have a high-interest savings account that earns 2% interest. Suppose also that the stock market will grow 5% per year. It seems you'd have to choose to divide your money between the two and settle for an at-most 5% gain on your investments, but why not have both? Consider the following scheme:
Invest all your money in stocks, except for the minimum amount required to hold the savings account without penalties (keep this amount in the savings account at all times). Two days before the "interest-earning day" of each month, sell all stocks and deposit the money temporarily in the savings account. You will then earn 2.5% (divided by 12) interest on all that money. Immediately after the interest is earned, reinvest everything in the stock market. Repeat this process each month. This way you earn interest as if the money was sitting in savings, but simultaneously have it invested in the stock market for most of the year. Does this scheme work?
The main downside to this that I can think of is that since it takes a few days to buy and sell stocks, you're losing a few days of having your money invested in stocks each month, hence you don't get the full 5% each year from stocks. But supposing your money was not invested in stocks for 6 days each month, then your money is invested in the stock market for about 80% of the year, so you earn about 4% from the stock market instead of 5%, plus the 2% interest, for a total of 6% instead of the 5% from stocks alone. Still seems like a sensible deal, no?
(2)2 Comments
Sorted by latest first Latest Oldest Best
No. Virtually all savings accounts pay interest based on what your average balance was over the course of the month, not based on what it was at one particular moment in time.
Besides the fact that bank accounts don't earn interest that way you are ignoring many other aspects.
Fees. If that buying and selling costs you money you have to figure that in your math.
Taxes. If you sell for a profit you can trigger taxes being due.
Missing out. There was a question recently about missing a few days a year could cost you a lot of money. Your days out of the market might miss the best days or the worst days. Your assumption that 80% invested only costs you 20% of the increase might or might not be true.
Terms of Use Privacy policy Contact About Cancellation policy © freshhoot.com2025 All Rights reserved.