CD Investment Strategies

Investing in certificates of deposit, more commonly known as CDs, is a safe way for depositors to make a little extra money in interest. When putting your money into a CD, there are a few things to consider to ensure you get the greatest return for your investment strategy.

CD Investment Strategies and Considerations

• Term Length: How quickly will you need to access your money? If it’s not for a while, choose a longer term CD. Typically, the longer the investment period, the higher the interest rate generated.
• Maturity Date: Mark the CD maturity date down on a calendar. If you do not remember to contact the bank to access your money during the grace period, they may just roll it over into another CD of equal terms, even if there are higher rate options available at the time.
• Deposit Amount: How much money do you have to invest at any given bank? If you have a sizable amount of money, it is best to invest your it at a variety of banks and credit unions because CDs are insured by the FDIC or NCUA only up to $250,000 for an individual investment.
• Savings Purpose: Ultimately, what are you going to use the money for? If you are investing for retirement, you may want to set up a CD that rolls your interest into a separate retirement savings account. However if you want to make your money grow, then a CD with compounding interest may be a better choice.
• Interest Rates: Are the interest rates fluctuating wildly? If they are predicted to go up from your opening date, a short-term CD may be better as you can get your money out more quickly to invest elsewhere. If you think that the rates are headed into a downward spiral, locking into a long-term CD with the higher interest may help you gain an edge.

Regardless of the CD investment strategy you want to follow, you need to be 100 percent sure of your goals for the money you deposit. It is important to research all the terms of your CD investment so you can make an educated decision. Be sure to compare the best CD account offerings from banks with those CDs insured by the NCUA to get the best interest rates on a safe investment tool.