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Jumbo CDs: What Is a Jumbo Certificate of Deposit?

Jumbo Cds: What Are Jumbo Certificate of Deposits?

Although interest rates fluctuate on CDs, they are still a very safe investment for those who want to save for their futures. The recent recession has created awareness that people must put away for future needs and unexpected present needs. Investors have many different choices for investing in CDs. Jumbo CDs are one of the many investment options. Jumbo CDs offer investors the chance to earn high yields over a length of time. Jumbo CDs require large investments so not everyone may have access to the minimum deposit amount. There are advantages and disadvantages to any certificate of deposit investment.

How do Jumbo Certificate of Deposit CDs Work?

Jumbo CDs are investment ventures that require a minimum of a $100,000 deposit. Investors agree to certain terms and interest rates for their deposits. The issuers provide the investors with deposit certificates that reflect the agreed interest and terms. Jumbo CDs are generally 1 to 10 year investments. Investors must be willing to leave the money in CDs for at least 5 to 10 years to benefit from the potentially high gains that jumbo CDs offer.

Advantages of Jumbo Certificate of Deposit CDs

  • They are safe and stable investments. Investors have the safety in knowing that they have a large amount of cash flow for future investments. Investors do not have to worry about accessing future funds to start a business, send kids to college, purchase a home, or take dream vacations. Investors know that their money will be there when they need it.
  • Jumbo CDs have a high yield of return over time. Jumbo CDs are designed to earn investors money over time. Investors receive high interest rates that gain substantial interest over the length of the terms. As long as investors do not withdraw their money, they earn a high yield of return over the length of the CDs. Always check out Jumbo CD Rates before investing.
  • They are a low risk. Investors know that they will leave with at least the principle amount of their original investments. No matter what interest rate that investors receive, they know that their money will earn some interest over time. The original amount of the deposit is guaranteed at any time.
  • Jumbo CDs are safer than investing in the stock market. The stock market is so volatile. Investors can make a fortune one day and lose everything the next day. CDs do not require such a gamble with investors’ money. The most that investors can lose is a few months of interest on the principle amount invested. They do not have to worry about losing the principle and the interest like investors who invest money into the stock market.
  • They have a higher return than money market accounts. CDs require a higher rate of return than money market accounts do. Jumbo CDs require a higher deposit amount so investors gain a higher rate of return. The amount of time invested and the principle invested is the key element in high returns for Jumbo CDs.

Disadvantages of Jumbo Certificate of Deposit CD

  • They have a low short-term yield. Jumbo CDs are designed to earn investors high yields over time. If investors invest their money in short-term Jumbo CDs or if they withdraw the money before the maturity date, they lose the potential gain on their original investment. If the money does not remain then the money does not gain interest.
  • Jumbo CDs have high deposit amounts. Many investors may not have enough money to invest the $100,000 minimum. Jumbo CDs are for serious investors who can afford to let their large sums of money sit and grow interest.
  • They are a long-term investment. Many investors cannot afford to let such a large sum of money sit in CD accounts. Future investments may require the use of money set aside in Jumbo CDs. Investors must make sure that they have an adequate amount of money in emergency savings accounts for future needs that arise before the maturity dates of CDs.
  • Jumbo CDs may not be FDIC insured. The FDIC only insures up to $250,000 in investments. If the account is a joint CD account, the FDIC insures each depositor up to $250,000. Nothing over the maximum deposit is covered if the financial institution fails.

Although Jumbo CDs require large deposit amounts, they are wonderful investment opportunities for investors who invest in long-term Jumbo CDs. Jumbo CDs are not an investment that offers high short-term gains. Investors should make sure that their deposits are insured before opening Jumbo CDs.

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