5 Things You May Not Have Realized About MaxMyInterest

The MaxMyInterest booth at the Finovate conference in New York on September 23, 2014.

The MaxMyInterest booth at the Finovate conference in New York on September 23, 2014.

Is Max too good to be true? How can I earn more money on my cash without paying expensive fees, being subject to stiff restrictions on transferring my money, or maintaining a high minimum balance?

We heard many versions of these questions last week when we presented Max at Finovate. Banks, brokerages, and RIA platform representatives all came over to meet us, as well as individuals eager to try out Max for themselves.  We were excited to receive some terrific press coverage from journalists who really grapsed what we’re doing.  To address some of the questions we recieved, let’s dispel a few Max myths:

Max is not a bank, and Max never takes custody of your funds. Many customers have asked how they can send us money to optimize. With Max, you don’t send us any money.  Your money remains in your own bank accounts, automatically moving between your own accounts to where you can earn the best yield each month.

There is no minimum balance required to use Max. These are your accounts, so the only minimums are those imposed by the banks. The online banks in our system have account minimums of either zero or $1.00.  They charge no monthly fees.  The only minimums that might apply are those imposed by your own checking account; often banks will require that you keep a minimum of $1,500 to avoid monthly fees.  But Max does not impose any minimum balance requirement.

There are no incremental transfer fees associated with the monthly optimizations. Every three months, Max charges a simple fee of 0.02% on the balance that is being optimized in your linked online savings accounts, for a total of 0.08% per year. This works out to approximately 10% of the gain that most members can expect by using Max, while our members keep the remaining 90% of the gain. We don’t charge a fee on the money that’s in your checking account.

There is no term to the deposits. These are savings accounts, held in your name, to which you have daily access. The rates offered by these online banks are typically better than even a 5-year CD at most brick-and mortar banks.  These rates are so good simply because the online banks don’t have to pay for the costly overhead of branches.  This saves them ~1.50%, and they’re passing on roughly half of these savings to depositors in the form of higher rates That’s why most Max members today are earning approximately 0.90%, which is about 0.80% higher than the national savings average and almost 0.90% higher than the yield on most money market funds.

Max keeps you optimized automatically. Max doesn’t just tell you what you need to do to earn more on your cash; Max does it for you. The Max system is fully automated, so you set it up once and then Max does the rest.  Max monitors interest rates daily, and once a month, instructs your banks to send funds between one another to keep you optimized, maximizing your interest income while staying within the FDIC insurance limits at each bank, and restoring your checking account to your desired balance each month.  You can log into Max at any time and see your balances, view the status of each of these transfers, request intra-month transfers via our Intelligent Funds TransferSM feature, and change settings to customize how Max works for you.  Come tax time, we plan to have in place a feature that delivers all of your 1099s to you via a single PDF, eliminating the hassle of retrieving a separate tax form for each account you hold.

Have more questions? You can reach Max Member Services at member.services@maxmyinterest.com.

Why Cash, Why Now?

FinovateFall2014MaxMyInterest is presenting at the FinovateFall conference this week in New York City. In honor of the conference, which showcases innovative financial-technology solutions, we’re taking a look at the problem that Max solves: people are not earning enough on their cash in the bank, and they’re taking more risk than they’d like by not staying under the FDIC limits on their bank accounts.

Cash makes up a reported 40% of Americans’ holdings — far more than most asset-allocation models would recommend. With the stock market at an all-time high, why are investors holding onto so much cash?

There are several logical reasons why people would choose a more conservative asset allocation, yet in doing so they’ve missed out on a stock market rally which has been going strong for more than three years.

Some investors feel the market is overvalued and are waiting until stock prices fall to buy more.  They remember the tremendous buying opportunities that existed at the depths of the financial crisis. Investors who had “dry powder” — cash on the sidelines available to invest — were able to triple their money simply by buying the S&P 500 Index at the bottom and waiting for the recovery to take hold.

Many savvy investors employ a strategy called dollar-cost averaging, which reduces the risk of market timing by taking a fixed amount of cash and deploying it methodically in equal installments over several days, weeks, or months. This strategy requires holding extra cash, because it takes some time to accumulate the position that the investor ultimately wants to hold.

Investors’ appetite for cash also depends on how old they are. For millennials, who came of age during the 2008 global financial crisis and the recession that followed, the equity markets are viewed to be perilous. Many investors in this age bracket are ultra-conservative in asset allocation and don’t want to own any stocks at all. As a result, they keep a larger proportion of their assets in cash than people their age usually do. According to a recent Forbes article, 40% of millennials favor cash over any other asset class.

Investors approaching retirement tend to hold a larger portion of their portfolios in cash and fixed income instruments — but with interest rates expected to rise, holding long-term bonds could be a losing strategy, so many of these investors have pulled cash from bond funds, hoping to preserve its value better by keeping it in cash.

One investor who’s holding lots of cash is Warren Buffett, whose Berkshire Hathaway has $55 billion in its corporate bank account. Buffett knows that opportunities are out there, and cash gives him the freedom to scoop them up when they become available. As we wrote earlier, Buffett has historically saved up cash when the markets rise, and spent it quickly when the markets fall.  He is perhaps the ultimately market timer.

The trouble with keeping a large percentage of your portfolio in cash is that cash provides little, if any, real yield, often underperforming inflation. Many investors also grapple with the limits of FDIC insurance, which only cover the first $250,000 per depositor, per account type, per bank.  For investors who hold cash in money market funds (as is often the case in brokerage accounts), they are not even covered by FDIC insurance, meaning their cash could be at risk.

For Max members, holding cash on the sidelines becomes less of an issue. Max members are currently earning a weighted-average 0.88% yield on their cash, far more than the national savings average of 0.11% or most money market funds that yield a paltry 0.01% today. Even in this low-interest-rate environment, that means Max members are earning 8 times as much as the average bank customer on cash deposits. While each investor should make his/her own determination as to how much cash to hold, at least via Max, they can rest easy knowing that they’re earning as much as possible on that cash, so that there’s more of it at the ready when the next investment opportunity presents itself.

Stock Picking for a Cause: Q&A with Portfolios with Purpose Founder Stacey Asher

Portfolios With Purpose founder Stacey Asher (left) presents a check to the Jericho Project.

Portfolios With Purpose founder Stacey Asher (left) presents a check to the Jericho Project.

On a trip to Tanzania in 2011, Stacey Asher discovered that the charity food pantry where she was volunteering was vulnerable to shutting down in situations where it didn’t have enough money, leaving 250 local children hungry. Asher, on vacation from her job in hedge fund marketing in New York City, asked how much it cost to fund the operation for a month.  The answer: a mere $250.

Asher figured she would have no trouble canvassing her network of finance friends back home to ensure a steady stream of donations that could keep the kitchen open. Then she thought, what else could she do to support her friends’ favorite causes while asking them to back hers?

The model she came up with is a cross between fantasy football and stock-picking: a stock contest that lasts a year and involves choosing 5 stocks. Participants, 90% of whom are finance professionals, pay an entry fee and choose a charity to support. The money that’s raised goes to the charity chosen by the winner in each contest category.

Portfolios with Purpose launched in 2012 as a beta, raising $25,000 for charity; the next year, after a public launch, the nonprofit raised $185,000. Based in New York City, the nonprofit now attracts some of the biggest names in the world of hedge funds and Wall Street.

Basis Points asked Asher about her idea of linking stock picking and philanthropy, and where her nonprofit is headed next.

– Is stock-picking something you do yourself?  

One of the many reasons I started Portfolios with Purpose was to create a contest in which everyone with an interest in stocks and philanthropy could participate. I was always interested in the stock market, but never confident enough to actually invest outside a small investment account comprised predominantly of index funds.  Portfolios with Purpose offers a fantasy stock competition that is completely anonymous unless you are in the top standings.  I hope this provides even the most timid of investors to test their skills and see how they rank amongst the top investors in the world as well as against their peers.

– What are the most popular charities/causes for contestants to choose?

The three most supported charities this year include Wounded Warrior Project, New York Hedge Fund Roundtable, and St Jude Children’s Research Hospital. We have over 200 different charities represented in the competition. Each charity listed includes personal comments from each player about why he or she chose the particular charity as well as a direct link to each charity’s homepage.

– What’s next for PwP?

With the 2015 contest only a month away (registration opens on October 15th), we are working hard to make sure we have another successful year. We also have PwP Mini Games launching on Oct 1st. PwP will now allow friends, firms, schools and any other social groups to customize and host their own competitions throughout the year. Mini Games will open up more opportunities for people to compete, have fun and raise money for even more worthy charitable organizations.

 

Ally Bank Raises its Online Savings Rate to 0.90%

Online Saving Just Got Better With GE Capital's 0.95% Interest Rate

Is a rise in interest rates taking hold?

This morning, Max members began earning even more on their cash, without lifting a finger.

Ally Bank raised the interest rate it pays on its online savings account from 0.87% to 0.90%. Over the next 30 days, every Max member with an Ally Bank account will benefit as their cash balances are reallocated, directing funds to Ally Bank to earn this higher rate. No need to monitor interest rates. No need to login to their online savings accounts or order funds transfers. Max does all of this automatically, in the background, with no user intervention required.

The recent rate hikes by both GE Capital Bank and Ally Bank seem to suggest that the rise in bank interest rates that we’ve long been expecting may be coming to fruition. Since the financial crisis, banks have continuously cut rates to match the decline in bond yields and manage their balance sheets. Investors have suffered. Yet the online banks – most with different business models than traditional brick-and-mortar banks – can put incremental deposits to good use. As rates start to rise, we expect more entropy in rates, along with a widening of the spread between the interest rates offered by online banks vs. their brick-and-mortar peers. This means that it will become all the more important to focus on whether your cash is optimally invested.

Today, our Max members as a whole are earning a weighted average 0.89% on their cash that’s being optimized, automatically. That’s 0.78% more than the national savings average, and 0.88% more than most money market funds. Many members are earning even more, up to 0.95%, FDIC-insured.  You can learn more about Max at MaxMyInterest.com

Back to School: Every Little Bit Counts

School's back in session, so it's time to take a look at your finances.

School’s back in session, so it’s time to take a look at your finances.

In school you learned how to get the highest score on a test: first answer all the questions you know, then go for partial credit on the harder ones. Your family’s portfolio can work the same way, first focusing on the decisions that will have the biggest impact and then searching for ways to enhance your returns on the margin. Here are three ways to streamline your finances so that your money works harder for you.

 

– Choose ETFs

Picking individual stocks is tough; even the pros often can’t select winners. Statistically, investors who try to bet on individual companies rarely beat the market. But many people keep trying to pick individual stocks because they’ve read the fairy tales about others who have built fortunes on one stock. Unfortunately, unless you invest in a company early on and it becomes a stock-market juggernaut, you are unlikely to amass a huge profit from just one holding.

The more conservative way to invest in equities is to buy low-cost, broad-market ETFs and to hold on to them for many years, dollar cost averaging into your position over time. That way, you diversify your risk among a large number of stocks without trying to time the market, while keeping your costs low.

 

– Avoid high fees

Why do fees matter? This is one of the areas where investors have a chance to make a real difference in their results, regardless of how the market performs. Every dollar you spend today paying fees – on your funds, your bank accounts, or your investment adviser’s services – is a dollar that won’t compound in your portfolio over time. The power of compounding is what makes a portfolio grow in a steady, reliable way for most investors. Fees aren’t inherently bad — what matters is the performance of your investments net of fees.  If you have a stock fund or a financial advisor that consistently outperforms the market, it may be worth the extra fees.  The problem is that with equities, it’s difficult to find someone who can consistently outperform the market by a wide margin year in, year out.  If you’re paying 1.0 – 1.5% in fees each year, that can put a real drag on your returns over time.

 

– Earn more on your cash

There will always be some portion of your portfolio that you choose to keep in cash, typically held in your bank account or in money market funds. If that cash on the sidelines isn’t earning as much interest as it could, you’re leaving money on the table. Just like with high fees, earning little interest on your money in the bank puts a drag on your portfolio — money that could otherwise be compounding over time. MaxMyInterest.com offers an investor-friendly system that helps you consistently earn more on your cash by helping take advantage of the higher yields offered by online banks.  Today, these yields are as high as 0.95%, considerably higher than the national savings account average of 0.11% or most money market funds that yield a paltry 0.01%.  By monitoring for changes in interest rates, and automatically helping your money move to the leading FDIC-insured banks offering the highest rates each month, MaxMyInterest can help you earn higher yields on your cash, boosting the returns on this portion of your potfolio.

Online Bank Rankings: What’s Missing?

Online-Bank Rankings: What's Missing?

Earn the best returns on your cash, even as interest rates change.

When perusing rankings of online banks, be aware that there’s a crucial piece missing.

Investors who want to safeguard their cash while earning more interest know that online banks are a smart choice. The best of these banks offer considerably higher interest rates for savings accounts than brick-and-mortar banks, with the same FDIC deposit-insurance guarantee from the government. That’s why it makes sense to keep excess cash — above what one needs for near-term expenses — in an online savings account, where it will earn more without taking any more risk.

The problem: banks change their interest rates without warning. If you’ve set up an online savings account with a particular bank, and suddenly the interest rate drops, you might be earning less than you could be elsewhere. If a rival bank raises its rates, you will miss out if you don’t have an account there. And if you’ve decided to solve this problem by opening multiple accounts, you’ll still have to monitor rates and move money between them as rates change.

MaxMyInterest solves this problem for investors, by monitoring interest rates daily and helping your cash flow to the banks offering the highest rates. Our service currently encompasses five of the leading online banks: Barclays, American Express Personal Savings, Capital One 360, GE Capital Bank, and Ally Bank. Each of these is FDIC-insured up to $250,000 per depositor, per account type. We’ve chosen these banks based on several criteria, including customer service, reputation and heft. Each has a depositor-friendly signup process and offers accounts with no fees and no minimum balance.

Once MaxMyInterest members set up accounts at these banks and link them to Max, our service automatically helps move their money between their own accounts to optimize the interest rate they earn. We also take FDIC coverage into consideration, so our members know their cash is insured.

This allows our members to earn the extra interest that online savings accounts pay above brick-and-mortar banks, without worrying about whether they will continue to earn the most as rates change. After a one-time setup, our members rest easy, knowing that Max is looking out for the best rates and optimizing their accounts, automatically.

Online bank rankings are a helpful tool, providing a better understanding of the online banking landscape. Max works with the online banks that sit atop these annual rankings, but addresses the last piece of the online banking puzzle by helping depositors earn the best returns on their cash, even as interest rates change. We’ve also included additional features to make online banking as simple as ‘checking’ and ‘savings’.

Online banking is smart. Online banking + Max is smarter.

Is Warren Buffett Predicting a Market Peak?

For disciples of billionaire investing guru Warren Buffett, now might be a very good time to hold cash. With Berkshire Hathaway stock hitting a 52-week high, handsomely outperforming the S&P 500 over the past two years, it’s pretty clear that being “greedy when others are fearful, and fearful when others are greedy” is a winning strategy.

With help from our friends at investormill, we took a look at the correlation between Berkshire Hathaway’s cash position and the broader U.S. stock market, using the S&P 500 as a proxy.

Berkshire S&P Chart

Buffett is among the most disciplined investors, happy to sit on the sidelines for several years if need be until he sees value. Looking at Berkshire Hathaway’s cash position – a staggering $55 billion – it’s evident that he remains as disciplined as ever, building up cash just as others are so eager to spend theirs amidst an ever-frothier market. When the market dips, he can be expected to deploy this cash, taking advantage of “time arbitrage” – the ability of investors with longer time horizons to reap outsized gains. Family offices and private equity funds (and their investors) are other beneficiaries of this model of investing.

What does this mean for individual investors?

With U.S. households sitting 40% in cash (even high net worth households are holding an astounding 31% cash), some would argue that the equity market has a lot longer to run. But many investors still recall the pain of the financial crisis, and savvy investors profited handsomely by having dry powder on the sidelines, so that they could plow money into equities at precisely the time that everyone else was selling anything that wasn’t nailed down. Those brave enough to buy into the S&P 500 at its low of 676 in March of 2009 have nearly tripled their money by this point.

As I mentioned recently during an interview with Christine Benz at Morningstar, many investors are holding a disproportionate allocation of cash because fixed income seemingly has nowhere to go but down given the expectation that interest rates will rise. Yet they don’t want to deploy the proceeds into equities or other asset classes, so the funds sit in cash by default. In this environment, it becomes all the more important that this large cash allocation earn as much as it can without risk of loss of principal.

FDIC-insured online bank accounts seem like a smart place to store this cash. We developed MaxMyInterest to help investors earn as much as possible on cash by helping spread it out across some of the leading names in online banking. Max members are earning a weighted average of 0.88% today, far more than most bank accounts, money market funds, or even CDs. Their cash remains liquid, held in their own names, at their own accounts at leading FDIC-insured banks. Yet when interest rates change, their cash automatically migrates to the banks offering the best rates, so that they can continue to maximize their yield while remaining liquid, ready for the next market opportunity.

Max at SXSW 2015: Help Our Panel Get Selected

 

There’s a way to do things, and then there’s the better way. Here at Max, we believe in optimizing everything, as I’ve written before. To explore more ways we can all get the most out of our lives, I’ve teamed up with Wallaby Financial CEO and co-founder Matthew Goldman to propose a panel for the 2015 SXSW tech conference in Austin, TX. On this panel, Matthew and I will discuss our favorite hacks for life optimization (including apps like Uber, HotelTonight, and Seat Guru). In conversation with the audience, we plan to talk about why optimization is important, how our companies design products for optimal effect, and what industries are ripe for optimization next, after credit cards and bank deposits.

Matthew and I are both passionate about this concept, and we run our own lives this way. Like many Max members, I take care to use only credit cards that allow me to maximize rewards points. Not to do so would be foolish, like leaving money on the table.

We’re excited to present this panel — if we’re picked. Help our panel get selected for SXSW 2015 by voting for it! Panels are chosen based on a number of factors, including your votes, so if you’d like to see us at SXSW, help distinguish us from among the 3000+ other panels that have been proposed. After a free registration, you can vote for any panel you’d like (but only once for each panel).

We appreciate your help as we spread the word about the benefits of optimization.

Financial Innovation Makes Dining Out Easier

Slide to Pay

With one swipe and tap, you can pay for your meal and be on your way.

This morning, restaurant-reservation app OpenTable announced a new feature: Slide to Pay. At the conclusion of a meal, simply pull up their app to find a copy of your bill. With one swipe and tap, you can pay for your meal and be on your way. To start it works at 45 NYC restaurants, including Le Cirque, Artisinal, General Assembly and Smith & Wollensky. More are surely to follow in short order.

What OpenTable has done here is simply brilliant: a game-changer in dining payment options. For restaurants, it eliminates paper, frees up server time, and keeps customers happier. For diners, it streamlines the most unpleasant part of the meal: payment. Now imagine how much better it would be if you could incorporate credit-card optimizer Wallaby’s technology, so that the OpenTable app would also pick the best credit card to use to maximize your rewards points.

Part of the reason that I – and many others – love Uber, the fast-growing livery-car dispatch service, is that they’ve simplified payment. No longer do you need to dig out a credit card at the end of your ride, swipe, select a tip amount, and wait for a paper receipt. Payment is pre-wired, and automatic, with a receipt arriving by email.

Consumer apps like these make optimizing life easier. So why is banking still so difficult? If you’re managing multiple accounts and need to move money from savings to checking on the go, it’s a complicated mess of logging into one or more banking websites, choosing from which account you’d like to pull the funds, selecting an amount, transfer date, and two or more confirmation screens. After all of this hassle, you may have inadvertently pulled funds from the least optimal account.

With MaxMyInterest, we’ve tried to simplify funds transfers – much like OpenTable and Uber have simplified dining and transportation – via our Intelligent Funds Transfer(SM) feature. Let’s say you want to move money from savings to checking. Simply login to the Max site on your phone (no need to download an app), click on the arrow that points from savings to checking, type in an amount, and hit “Transfer Funds.” Max automatically pulls the requested funds from your savings accounts with the lowest interest rates and sends them to your checking account. Need to move funds in the other direction? Max automatically picks your bank accounts that offer the highest yields to receive the funds.

It’s simple. So simple, in fact, that some of our members have dubbed it the “easiest funds transfer in the world.” And Max is an entirely closed system, connecting your accounts to one another, but not to the outside world. So money can never leave your own accounts.

Hats off to OpenTable and Uber for making our lives easier. We hope you’ll find that Max makes banking easier, too.

5 Money Management Tips for College Freshmen

5 Finance Tips for College Freshman

Creating good money habits in college

No matter how financially self-sufficient a teenager is, going to college marks a major step toward becoming an adult. For the first time, you’re on your own. The choices you make about your money can set a precedent for how you manage your finances in the future. You might be looking at how to apply for credit cards with no credit history, set up your first savings account or just spending whatever money you have. Either way, whatever you choose to do now will impact your credit history for a least the next 7 years.

Here are five ways college freshmen can create good money management habits:

1. Make a budget

Figure out how much money you have available to spend each semester, either from your family, your own savings, or a job you’ll be doing while in school. Determine what you’ll need to pay for: books and course materials (unless your parents or your scholarships cover them), fraternity or sorority expenses, fees for any student group you want to join. What’s left over is the money you can spend on new clothes, late-night pizza, or anything you want to do just for fun. If your projections show you won’t have money left over, or you can’t afford the expenses you expect to incur, you’ll need a term-time job to fill the gap. With so many college students graduating with substantial student debt burdens, the last think you need is expensive credit card debt, too. It might also be worth to note how many times a day can a debt collector call, as well as what they have to include over the phone to keep it a legit and legal debt collection call, otherwise, you could be eligible to receive compensation.

2. Shop around for a bank account

If this is your first time opening a bank account, or if you need a new one with a bank that’s convenient to your school, do your research before signing up. Make sure you’ve chosen a bank with no minimum balance (or one you can easily meet), low fees, and overdraft protection.

3. Practice smart banking

Always know how much is in your account at all times. Your parents probably balanced a checkbook; today you can use money management apps on your smartphone to keep tabs on how much you’re spending and how much is left in your account. Know what the bank will charge you if you use another bank’s ATM to withdraw cash, and plan ahead so you’ll have time to get over to your own bank instead. If you have a debit card, be extra-careful that you don’t dip below your account’s balance; the fees to overdraw your account could be more than you spent in the first place. The same goes for writing checks or using an online or mobile payment app to send money to friends.

4. Invest any excess cash in online banks to earn extra interest

Above whatever cash you need to keep in your bricks-and-mortar bank near campus, consider placing the rest of your school-year cash in an online savings account. These bank accounts tend to pay more in interest, sometimes as much as 1%, which means $1 per year for every $100 you keep in your account. That money adds up, even if it’s only enough to buy yourself a cappuccino at first.

5. Get a credit card

It’s important to build your credit rating in a positive way. This will help you to rent an apartment or get a mortgage later on. If you can, sign up for a credit card. But be sure only to use it to buy things you can afford (see: budgeting) and for which you already have the money in your account. Pay off the entire balance each month. Even one late payment can negatively impact your credit rating for years to come, and paying just the minimum payment due will result in expensive charges that compound daily until the entire balance is paid off. If you do miss a payment, call your credit card company, pay the outstanding balance in full immediately, and beg for them to remove any fees or service charges or black marks from your account (most will do so if you ask nicely — just don’t make it a habit.)

If you don’t understand the terms on your bank account or your credit card, or if you have any other questions about your finances, don’t be embarrassed to ask your parents or your on-campus advisers. Now is the time to create good money management habits. You want to avoid making mistakes in college that will cost you money or, worse, hurt your credit rating. No one will think less of you if you ask a question. And if you’re looking for a primer on personal finance, one book that we like is Get a Financial Life by Beth Kobliner.