The more you learn about certificates of deposit (CDs) the more you’ll realize that these could be an essential part of your investing strategy. Even if you don’t regularly invest in CDs, you may find that they have their place every now and again.
If you’re ready to consider CDs as part of your overall investment plan, here are some of the benefits that may lead you down this path:
1. Fixed interest rate
A CD has a fixed interest rate. So, you know exactly how much money you’re earning over its term. There’s no changing. There’s no guesswork. The rate that you agree to upfront is the rate that remains the same until your CD expires.
2. Predictable returns
This goes along with a fixed interest rate. Since the rate remains the same, so does your return. And when your return is predictable, it’s much easier to plan for the future. There’s no gray area that could cause confusion down the road.
3. Various terms
Are you seeking a one month CD? How about three or six months? What about five years? With so many terms to choose from, there’s a good chance that you’ll find something that suits your current circumstances and long-term investing goals.
When you invest in a CD, you know your money is safe. This is particularly true if you invest with a financial institution that is FDIC insured. There’s no replacement for safety and security when it comes to your money.
5. Ladder options
A CD ladder allows you to spread out cash equally across multiple CDs. With this approach, you can take advantage of varying interest rates. Also, it gives you access to funds at varying intervals in the future.
Tip: use an online CD ladder calculator to learn more about your options and project your return. This can help you craft the ladder that best suits you, your funds, and your short and long-term goals.
While these are among the five top benefits of CDs, there are others that could come into play regarding your personal situation. Contact your local bank or an online lender for additional information. This will help you make an informed and confident decision.
Do you have any experience investing in CDs? Are you considering this investment strategy in the future? Is there something, in particular, you look for in a CD and/or bank?