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February 17, 2016Feb 17, 2016

Is this Stock Market volatility giving you Indigestion?

If you’ve been losing sleep over the past months as you watch your stock portfolio gyrate, perhaps it is time to consider taking some of those funds and investing in your local community bank. Your savings are Federal Deposit Insurance Corporation (FDIC) insured (up to legal limits) and no one has ever lost money on a FDIC insured deposit. Also, your savings are used to benefit your local community by financing local businesses and homes.

Bank of Bozeman would love to help you quit worrying about the safety of your money. Come see us today and check out our increased Money Market and CD rates. Don’t wait for the next big stock market drop to take action.

See what the market is doing.
About the Author: Clinton Gerst is the President of the Bank of Bozeman, an Independent Community Bank in Bozeman, Montana.
This article is provided for educational and informationalpurposes only, without any express or implied warranty of any kind, and shouldnot be considered legal or financial advice. All expressions of opinionreflect the judgment of the author as of the date of writing and are subject tochange. You should consult with an attorney or other professional todetermine what may be best for your individual needs
January 26, 2016Jan 26, 2016

Making Compound Interest Work For You

Compound interest is interest paid on interest already earned on a deposit or loan. Think of it as ‘interest on interest’. For those of you who struggle to pay off credit cards, compound interest is likely the culprit. Interest from the prior month is added to the principal you owe and you’re being charged interest on interest. Before long that $200 pair of shoes can end up costing you $600 or more. That is why many financial advisors recommend eliminating credit card debt.

Saving money is a way to turn the tables and have compound interest work for you rather than against you. To gain an understanding of how powerful compound interest can be, let’s look at an example of four hypothetical individuals: Karl, Joanne, Kylie and Branson. We’ll assume an average savings interest rate of 5% over their lifetimes, monthly compounding of interest, and they all stop depositing additional funds at age 70.
Karl is leading a very busy life and feels he has always had too many near- term obligations to save money. First it was buying a car, then paying off his own student loans, then getting married and buying a house, then paying for all the expenses raising kids, then their college....but he has resolved to start saving when the last kid is out of school. So at age 55, Karl starts regularly saving $1,000 every month.

Joanne spent all her money in her youth and incurred many expenses during and right after college that kept her from saving. But at age 25, Joanne starts saving $200 per month.
Kylie started saving as soon as she got her first job at age 15. She and her Dad walked down to her local community bank and opened a minor account for her and she has deposited $150 per month ever since.

Branson’s grandparents opened an account for him the month he was born. They took advantage of the bank’s referral program for new accounts and deposited $100 per month until Branson became 15, then Branson took over the tradition and made the monthly $100 deposits.

The lesson from the illustration (refer to the Investment Growth chart) is obvious: it’s never too late to start saving, but starting early can make a huge difference in achieving financial security. Saving regularly is practicing delayed gratification, and many psychologists view the practice of delayed gratification as a way to help develop emotional maturity.

And unlike the swings of the stock market, your bank account never goes down unless the money is withdrawn. Your money slowly and steadily grows with the assurance that it’s safe because it is covered by the Federal Deposit Insurance Corporation up to $250,000. No one has ever lost money with an account that was FDIC insured - even if the bank went out of business - no one.

Why start saving for your future with a community bank? Local community banks reinvest your money in the community. Start saving with a local community bank, your future self will thank you!
About the Author: Clinton Gerst is the President of Bank of Bozeman, an Independent Community Bank in Bozeman, Montana.
This article is provided for educational and informational purposes only, without any express or implied warranty of any kind, and should not be considered legal or financial advice. All expressions of opinion reflect the judgment of the author as of the date of writing and are subject to change.

You should consult with an attorney or other professional to determine what may be best for your individual needs.
December 10, 2015Dec 10, 2015

Will the Feds raise rates?

Bankers get this question a lot – from customers, investors, and our bank boards. There are seemingly endless experts out there with an opinion based upon their assessment of the latest economic data, world events, and the psychology of the individual Fed governors. Sorting through and reflecting on all these voices can be quite challenging even to professionals.

One of the most important voices worthy of attention is the market itself. The futures market reflects not only market expectations of a whole host of commodities like oil, cattle, and gold but also for many other asset classes including interest rates. The Fed Funds Futures market can be confusing to interpret, however, as the forward prices of the contracts reflect the probability of potential multiple fed rate moves of differing magnitudes. We simply want to know when the Fed will increase rates and by how much for each Fed meeting.
Fortunately the statistical analysis of this futures market has been done and kindly shared by the Chicago Mercantile Exchange.
This website is updated frequently to reflect market views. As of this writing the market is reflecting a 81% probability that the Fed will increase rates at the Dec 15th meeting and a 98% probability that the Fed will increase rates over the next 12 months.

So the market is currently telling us that a rate increase this year is likely. However, it is also telling us that rate increases in 2016 should be modest and slow in coming. Most market participants think the Fed will raise rates in December and then only once or twice more during 2016 (the website will show you the probability distribution at each Fed meeting). So if you are a borrower, you should continue to enjoy low rates for the next 12 months. If you are a depositor that is not welcome news, but several banks that tend to take the long view have increased rates in the longer term CDs. For example, we increased our five year CD rate from 1.10% to 1.50% APY while keeping our loan rates at very attractive levels.

We hope this market information helps you filter some of the pundit noise.
About the Author: Clinton Gerst is the President of the Bank of Bozeman, an Independent Community Bank in Bozeman, Montana.
This article is provided for educational and informationalpurposes only, without any express or implied warranty of any kind, and shouldnot be considered legal or financial advice. All expressions of opinionreflect the judgment of the author as of the date of writing and are subject tochange. You should consult with an attorney or other professional todetermine what may be best for your individual needs.