CD Investments: Are They Worth It? Introduction:
Investors who are looking for a great place to invest their money look to CDs as an option. CD rates change of a regular basis so investors can benefit from the rate increases. Investors like the fact that their money is safe as long as they abide by the terms of their agreement. CDs can offer a 100% return of the principle as long as no penalties incur. Some think that the stock market and money market accounts are a better investment because of the high gains that they receive. Investors must evaluate their personal situations to determine if CDs are the best investment for them.
Are Certificate of Deposit CD Investments Worth It?
Once investors evaluate their personal needs, they can begin to answer this question. CDs offer short-term and long-term investment options that can accommodate the needs of investors’ current and future needs. Investors have more freedom with CD investments than many other investments type. They can decide how much they want to save as well as the interest rates, terms, and penalties that they want. Financial institutions are flexible with CD options at certain times. Banks and credit unions that need the business of new customers may offer very attractive options that make CDs worth the investment.
The Advantages of Investing in a Certificate of Deposit CD
- CD’s Are Dependable Investment– CDs are investments that investors can depend on to make them money. Unlike the stock market, CDs are dependable forms of income. Principle and interest are guaranteed as long as the original agreement remains intact. They are not a high risk because investors are not gambling with their money. The money sits in the bank and grows while investors make decisions about how they plan to spend or reinvest the money at maturity.
- CD’s Earn Interest and Dividends– Interest and Dividend are the most enticing aspect of CDs. Investors just have to invest their money and watch the interest and dividends grow over the terms of the investment. Not all financial institutions offer dividends to customers. Dividends are additional funds that banks offer customers when there is a surplus of capital. It adds to the funds that investors receive from their interest payments. The amount of money that investors make may be substantial, depending of their original investments.
- CD Choices– CDs are investments that offer investors choices in their investments. Investors have the freedom to choose their terms, interest rates, deposit amount, and cd penalties in some cases. Investors do not have to have their money locked into CDs for a long period of time. Investors who want to make the most of their money consider laddering investments because it gives them additional freedom. Investors receive multiple interest rates at multiple terms so that money is available to them more often.
The Disadvantages of Investing Certificate of Deposit CD
- CDs May Offer Low Returns– CDs have a relatively low investment return. Although they are safe investments, investors do not earn a substantial amount of interest unless they invest large sums of money in CDs. Investors must be willing to continue to reinvest their money to see the returns that they want to see. Some investors may choose investments such as stocks, bonds, and money market accounts to earn higher returns. These investments have a higher rate of return than CDs.
- Certificate of Deposit Penalties– CDs come with high penalties for early withdrawal of funds. Fees can cost investors interest and principle in some cases. Investors who think that CDs are an investment with guaranteed returns are incorrect. The returns are only guaranteed when investors keep the CDs without making withdrawals until maturity. Penalties may be negotiable on some CDs. Larger investments may offer investors a higher ability to bargain their penalties.
- CD Rates Continue to Decrease– Interest rates on CDs were the highest in the 80s. The rates have continued to decrease since that time. Rates are currently the lowest that they have been in years as of 2011. If the rates continue to decrease, investors may want to consider looking at other investment types to make money on their investments. Investors may not want to lock in these rates with long terms if they continue to decrease at the current rate.
CDs are great investments that can offer investors beneficial gains in interest, and in some cases the dividends. They are safe investments for investors who plan to leave their money in these accounts. It is best that investors leave their money in these accounts for long-terms to maximize their investments. Making a plan for the future is the best way to benefit from CDs.