Investing in a CD is a great way to meet your savings goals. They have many benefits over other financial instruments that should be considered, and are one of the most preferred options for inexperienced investors. In this article, we’re going to give you five reasons why you should invest in CDs.
1. Insurance and Safety
Unlike investing in bonds or stock which can be high risk and volatile, CDs have a lower risk. You can rest assured that your money is in good hands and that you will get all the interest due. It is also critical that you confirm your financial institution is FDIC insured before you sign up for CDs. FDIC insurance will ensure that you get your money back should there be any form of failure or poor investment by your financial institution.
2. Fixed Rates
In spite of the fluctuating markets, CD rates are usually fixed for the entire term. You could always choose between either a fixed-rate, variable-rate, or adjustable-rate CD. All the rates are however quite high and don’t fluctuate with the current money economy ensuring you can always rest easy. A longer-term CD will give you much more return when compared to the short-term CDs. If you want to make more in interest rates, then ensure you opt for the long-term CDs lasting from around 3-5 years.
3. Different Maturity Dates
You could comfortably set your CDs according to your individual goals due to the different maturity rates. Whether you want to take a lifetime trip in one year or fund higher education for your child in 6 years, a CD will ensure you set the maturity rate to best suit you. This will help you accurately plan and manage your funds because you will not be able to access the cash until the time agreed upon.
4. Low or No Fees
Banks do not always charge any fees on money in a CD. There are usually no monthly fees or hidden charges to your money apart from the early withdrawal penalty. Ensure you are well aware of the amount of money you will be charged in case of early withdrawal.
5. Modest Opening Balances
With most CDs, you don’t need a lot of money to open an account and reap the benefits. There are certain retirement CDs that you could open with as little as $250. Contact your financial institution today to inquire about the minimum amount required.
As long as you don’t withdraw your funds early, CDs have many benefits which include competitive interest rates and guaranteed returns. Ensure you practice patience and money discipline to get maximum returns on your CD. It is critical that you set a term duration that you are comfortable with and stick to it to the very end. Remember that CDs are an investment and you need to wait for their maturity if you want to gain the maximum profits.