High Yield CDs are becoming more and more popular these days. At one time people wanted to invest most of their money into the stock market and hoped for a good return. Once the stock market crashed, many of these investors want a safer way to earn money. Many may still invest a small amount of money in the stock market and use CDs as a way to safeguard their stock market loses. CDs are great investments, but like anything else, investors must do their research before making any decisions. Make sure that your chosen CD has desirable benefits for the future.
High Yield Certificate of Deposit CD Overview: What Is a High Yield CD?
High yield certificate of deposits earn investors the highest CD rates available at any financial institution. These are greatly desired by investors because it is a safe way to invest and save money. There are no tricks involved in investing in high yield CDs. Investors shop around for the best rates, decide on a financial institution in which to invest the money, and watch their money grow from their investment. Investors have a clear understanding of the rates and terms before investing the money into particular CDs.
CDs do not offer the highest rates for investments, but they are guaranteed amounts of money. As long as investors keep their money in CDs for the term agreed, there are no penalties for withdrawing the money. Financial institutions are making CDs more and more enticing to customers who want to a good investment for their future.
The great thing about CDs is that they can be rolled over once the terms end on the original agreement. CD rates will probably increase during the time investors let their money grow in CDs so it is probably a good idea to reinvest the money after the maturity date. When investors reinvest their money, they not only have the principle but a nice chunk of interest that can earn them more money. Investing in high yield CDs seem to be a wonderful investment opportunity.
Advantages and Disadvantage of High Yield Certificate of Deposit CD
Just like any investment, there are advantages and disadvantages of high yield CDs. It is so important the investors conduct research and outline the advantages and disadvantages of investing in high yield CDs.
Advantages of High Yield Certificate of Deposits
- CD’s are safe investment opportunities. This is a guaranteed amount of money. Investors just have to sit back and watch their money grow. There is no way to lose money by investing in CDs unless the investor decides to take the money out before the terms are reached, or the financial institution was not FDIC insured.
- Interest can be paid to investors before the terms end. It is not necessary to take the money out of the CD and still make money. Some choose to have the interest paid annually or monthly. That money can be deposited into a checking or savings account. Many customers choose CDs for this reason.
- Many investors increase their earnings by laddering their investments. It is possible to break investments into varying terms. Laddering an investment means that investors have access to their money more often. A $10,000 investment can be broken down into 5 small investments of $2,000. When investors invest each $2,000 increment into a different term (6-months, 1-year, 2-year, 3-year, and 5-year) it means always having access to money.
Disadvantages of High Yield Certificate of Deposits
- There are penalties for early withdrawal. Anything can happen. Financial problems arise for everyone. It may be necessary to withdraw the money before the terms are reached in a high yield CD. Many financial institutions charge a few months of interest to the investors. If investors choose to have their interest deposited into a savings or checking account monthly, they can lose some principle when withdrawing the money since the interest did not accrue.
- Investors cannot capitalize on interest rate increases. If customers invest their money in a high yield CDs and the rates change before the terms are reached, they do not get to take advantage of the rate increase. A 1% increase can make a huge difference in the money that investors earn on their CDs.
- This is not an investment opportunity for those who want fast money. Current CDs earn less than 4% interest annually. Unless investors are investing large sums of money, the interest will only receive a small amount of interest.
The decision to invest in CDs is more of a personal preference. Investors must make a map of their financial futures to decide if such an investment is worth it to them. One thing is certain. CDs are a safe investment, and customers have a great deal of choices when it comes to terms.