Why you shouldn’t risk your own money in the market for a 9% return 

Deposits in Market Savings are FDIC insured and the investments are made by Save on your behalf to generate a higher return on your principal. 

Deposits in Market Savings are FDIC insured2 and the investments are made by Save on your behalf to generate a higher return on your principal. 

The Market Savings program is a unique alternative to traditional saving and investing products thanks to the dynamic duo of FDIC insurance and market returns.  

There are several investment options for investors to choose from, including investing on your own, investing in CDs, bonds, Treasury Bills, fixed indexed annuities, etc. This article will reveal how the Market Savings program differs from these investing avenues.  

I could invest on my own 

Over the past 20 years (2001-2021), the average annual return on the S&P 500 is 9.87%, according to New York School of Business researcher Aswath Damodaran’s “Historical Returns on Stocks, Bonds, and Bills: 1928-2021.” While this is greater than the Market Savings 5-year term’s 9.33% APY,1 it isn’t FDIC insured. Market Savings deposits are FDIC insured up to $250,000 per depositor, per bank.2 

Therefore, it all depends on your personal return goals and your risk tolerance. A $1,000 investment in stocks might achieve a return higher than the Market Savings program, but if the equity market declines, you may lose a substantial part of your principal.  

With the Market Savings program, your deposit is FDIC-insured,2 your investments will utilize sophisticated investment approaches that allocate across several asset classes in seeking to provide stable returns over time, and dividends paid out by the ETFs in the portfolio are reinvested automatically. 

Even if your Save investment strategies could have periods with a negative performance, your deposit is secure.  

I could invest in the ETFs Save uses to avoid the management fee 

Once again, it depends on your personal return goals and your risk tolerance. With the Save Market Savings program, your deposit is FDIC-insured,2 and Save utilizes sophisticated investment approaches in order to provide substantial, reliable returns – making the most of the decades-worth of portfolio construction and financial product development experience across the Save team.  

These are the same academic approaches utilized by sophisticated hedge funds, pension funds, and insurance companies – delivered by the Market Savings program without intermediaries, and with a reasonable fee that is only charged if the investment portfolios perform.  

Direct investment in ETFs could provide greater or smaller returns with the risk that you could lose some of your original investment.  

Treasury Bills  

T-bills: It depends on your personal return goals and your risk tolerance. As described by the SEC, Treasury Bills “are considered one of the safest investments because they are backed by the full faith and credit of the U.S. government.” Hence, your investment is likely safe, but your returns are not likely to be particularly high.  

Series I savings bonds 

Inflation-proof Series I savings bonds are a great option for investors, especially now since the rate is 9.62% for the first six months. But there are some downsides. After the initial 6 months, though, the rate may fluctuate depending on economic conditions. Additionally, the program is limited to $10,000 per person and per married couple and carries penalties for early withdrawal before the 5-year maturity.  

Alternatively, the Market Savings program is capped at $250,000 per depositor because that is the maximum coverage FDIC insurance offers. While not as high at the 6-month bond rate, the APY for the 1-, 2-, and 5-year terms are 5.73%, 5.78%, and 9.35%.1  

CDs and market-linked CDs 

A CD may also be an FDIC-insured option that pays a fixed rate and, in some cases, a market-linked return (market-linked CDs), but the Market Savings program offers APYs significantly higher than fixed-rate CDs.1  

The Market Savings program also yields higher potential APYs than market-linked CDs because we use our proprietary investment strategies and don’t charge commissions or fees beyond our management fee.1  

Some CDs also carry a significant unwind penalty that diminishes the overall product return compared to the Market Savings program.  

Fixed Indexed Annuity 

The Market Savings program is very similar to a Fixed Indexed Annuity, except for a couple of things, which are listed in the chart below.  

Features Market Savings Fixed Indexed Annuity 
FDIC Insured Yes No 
Term Length 1-, 2-, and 5-years  Usually >5 years  
Fees Charged  Save charges a 0.35% fee only when there is a return above 0.35%.  Fees up to 5% upfront 
Tax efficient investments Yes Yes 

The safety of your money is just as important as the return they generate. If you’re looking for an account with high-growth potential without a risk to your principle, consider Market Savings. Learn more about the perks of banking with Save here.   

1 Generally, an APY (or annual percentage yield) is the yearly return on a bank or investment account. Save Market Savings is a hybrid product and service that includes deposit account linked to an investment product. The deposit account portion of the Save Market Savings product and service is provided by Webster Bank, N.A., Member FDIC; and is non-interest bearing with a 0% APY. The investment portion of the Save Market Savings product and service offers the potential to earn an APY with a variable rate (Variable APY).  The Variable APY, if any, is derived from the investments made by Save on behalf of the customer within Save’s portfolio of strategies over the duration of term length selected by the customer.  The Variable APY, if any, will be equal to the cumulative return for the investments selected for you by Save for the term selected on the applicable maturity date. The Variable APY may be 0% but will never be less than the Minimum Variable APY of 0% per annum.  Assuming a minimum Variable APY of 0% per annum, if the Variable APY applicable to a particular maturity date is less than or equal to the Minimum 0%, the customer will not receive any Variable APY return for that investment upon maturity.  Variable APY’s are subject to change at any time.  Variable APY is not guaranteed.  The Variable APY presented is hypothetical in nature and reflects the potential growth that could accrue if the investment is held for the entire term selected.  Variable APY’s are based on hypothetical back-tested performance in the Save Moderate Portfolio from 2006 to present and are shown net of fees. Hypothetical back-tested performance is no guarantee of future performance and actual results will vary. For more detailed information please see Hypothetical Back-testing. The minimum deposit amount is $1,000 for the 1-year term and $5,000 for the 2-year and 5-year term. Deposits are FDIC-insured up to the maximum allowed by law, $250,000 per depositor, per bank. Management Fees associated with the investments may reduce earnings on the account. Customer withdrawal prior to maturity could result in additional associated costs. 

2 To obtain FDIC insurance coverage, customer funds provided will be deposited into non-interest-bearing accounts at Webster Bank. FDIC insurance coverage for funds deposited at Webster Bank is limited to not more than $250,000 per depositor, per FDIC-insured bank, per ownership category. Actual deposit insurance coverage may be lower if you have other funds deposited at Webster Bank, N.A.. Customers are responsible for determining the amount deposited in each account at Webster Bank, N.A., and for monitoring the total amount of their deposits at Webster Bank, N.A., to determine the extent of available FDIC insurance coverage in accordance with FDIC rules. Learn more at: https://www.fdic.gov/deposit/deposits. Only the funds customers provide and deposit with Webster Bank, N.A. will be eligible for FDIC insurance. Webster Bank is not providing any investment advice or responsible for the purchase or performance of any investment contracts. The funds held in the Apex Clearing Corporation accounts are not FDIC-insured, are not bank guaranteed, and may lose value with a minimum return of zero. Maximum balance and transfer limits apply. Neither Save Advisers, LLC, nor its affiliates, are a bank. Apex Clearing Corporation is a member of the Securities Investor Protection Corporation (“SIPC”), formed by Congress to protect “customers” of broker-dealers and to promote public confidence in the U.S. securities markets. Customers of a SIPC Member that fails financially are afforded certain benefits under the Securities Investor Protection Act (“SIPA”). These benefits are relevant only if the broker-dealer that “carries” a customer’s account fails and is liquidated under SIPA. At Apex Clearing Corporation, your investments are protected by SIPC up to a maximum of $500,000 total, including $250,000 in cash balances. Coverage limitations apply. To learn more about SIPC coverage, visit the SIPC website at www.sipc.org.  


Leave a Reply

Filter By Category: Investing
%d bloggers like this: