Considered to be one of the safest investments, a certificate of deposit (also known as a CD) is a type of product offered by banks and credit unions that is very much like a savings account. In a tricky market, investing your money in a certificate of deposit is a sound plan for many reasons.
First, CDs are insured by the federal government, which means that if the bank fails you won’t lose your money. The FDIC provides deposit insurance up to the amount of $100,000.00 per depositor per bank. If you have more than $100,000.00 to invest, you could deposit your money at two different institutions, or you could place accounts in different ownership names. You could also consider “laddering” your separate CDs to make sure some part of your capital remains liquid and available at certain times.
Second, CDs are a relatively simple and straightforward investments that even a novice investor can understand. You can walk into your bank and shop for your own CD. You do not need a broker to invest in a CD for you, and in the age of the internet, you can quickly find the best certificate of deposit rates online. There are brokered CD funds as well, which sometimes offer better rates. However, a brokered CD will be taken out in the name of the investment company, not in your own name. If you are looking for control over your money, a CD may be the best way to go.
A minimum deposit is typically required for a CD. “Jumbo CDs,” with a minimum deposit of $95,000 to $100,000, usually offer the best certificate of deposit rates. However, some institutions will offer lower rates on the Jumbo CDs and off a high yield certificate of deposit with a smaller deposit requirement. Before you lock your funds into a CD account, shop for the best CD rates at different banks.
