[hatch7]

And not one intelligent person is asking, how is the bank giving me a return for seemingly nothing?

HYSA investments are wildly irresponsible and risky. They degrade the financial system and support horrible practices and institutions.

I challenge anyone to find ONE financial instution which discloses what HYSA is invested in.

These aren't even good investments. VTI is up 25% y/y. With these "high interest" investments below the prime rate, you're literally guaranteed to lose money, all while taking a massive and unncessary risk.

[carlosjobim]

They lend your money out to other people paying a higher interest. In fact, they lend your money out several times.

Even if your bank pays 0% interest, they are lending your money out many times over to people who pay the bank interest.

[carlosjobim]

Reply to the poster below me, who was censored for some reason: AFAIK the money that people have in their bank accounts are used as reserves for all loans the banks give. I don't know of any separation of funds.

[mmiyer]

The bank gets 5.4% from the federal government.[1] HYSA rates closely track the federal funds rate, because the banks are essentially passing on the fed funds rate to consumers (minus a cut for themselves). The bank can also get 5.3% from short term treasuries right now. So the answer is basically that the federal reserve is giving the return.

1. https://www.federalreserve.gov/monetarypolicy/reserve-balanc...

[hatch7]

This is hilarious. You actually think the Fed is paying everyone's HYSA yields?

So, let me get this straight, you actually believe "Customers Bank", for example, which is currently offering 5.32%, is going through all the trouble of investing your money to get a 0.08% return from the same?

Or is it possible these HYSA institutions are investing your money into other, more risky investments, like foreign banks, for example?

Again, I have to wonder and ask, why has no intelligent person done the due dilligence to find out what their money is invested in for such a generous return, as they should for any other financial vehicle?

Literally not one person in this entire post can provide evidence of what their bank invests HYSA funds in. This is how financially illiterate we are.

[somehnguy]

Since when are High Yield Savings Accounts investments? They're FDIC insured bank accounts and inherently (essentially!) zero risk.

[hatch7]

The point is they're not zero risk. You are safer investing your money into an index fund ETF.

And if you consider them safe, then accept my challenge to find a bank which discloses what HYSA is invested in.

Or better yet, do the research yourself and prepare to be amazed and disgusted to see how the proverbial sausage is made.

And to the person clamoring on about FDIC insurance, I also invite to look up how many deposits it actually covers, while reiterating that they still have not yet found a single bank which discloses what HYSA investments are in.

The Wealthfront reply is on to something, by finding an article which alludes to mysterious "banks" your money is lent to. Do more research about those "banks" are, though. It's not at all what you think.

[cj]

Challenge accepted. Wealthfront:

https://www.wealthfront.com/blog/cash-account-apy/

https://www.wealthfront.com/blog/wealthfront-isnt-a-bank/ (See section #2)

> Because we broker our deposits, we’re able to offer you access to wholesale interest rates — the interest rates that banks offer to broker-dealers like Wealthfront for deposits, which can be higher than the rates banks offer individual customers. When our partner banks pay a high rate on your deposits, we pass along a high rate to you.

TLDR: Wealthfront gives your money to other banks who pay Wealthfront interest which is passed on to you. All FDIC insured.

[torstenvl]

How many times has the stock market seen major losses over the past 90 years?

How many times have FDIC-insured accounts seen major losses over the past 90 years?

[ezfe]

Lol what? A HYSA is lower risk than an index fund because it's FDIC insured.

[erehweb]

Where's the risk. It's FDIC insured, no?

[cj]

> These aren't even good investments. VTI is up 25% y/y.

It's easy to say this today, but a year ago today the majority of "experts" were saying we were heading for a recession (which never materialized). It was anyone's guess whether VTI would have been higher or lower y/y.

[mattgreenrocks]

HYSA has always been the place for emergency funds for me. Very different from an investment. Do people use HYSAs for investing?

[HumblyTossed]

Haha, you do you, man. And good luck to you.