There has been a lot of talk recently about people losing all their money in the stock market and real estate. Everywhere you hear talk about people losing half the value of their 401(k) retirement fund, or half the value of their homes, or worse. Some people have lost everything they ever earned, saved and invested to unscrupulous brokers who lure them into crazy pyramid schemes that are based on pure lies. So the fact that investing is inherently risky is something that gets hammered into our heads over and over and over again. Of course, the same people who are losing money on their investments right now made, at one time, a lot of money. And they're holding on to their investments in the hopes that their value will return. The name of the game is risk and return.
When it comes to certificates of deposit (CDs), risk and return is different from other financial products. The risks and returns of a CD tend to be less dramatic than other investment vehicles. When it comes to the risks of CDs, people need to remember that once they put their money into a CD they can't get that money out until the CD matures. If they access it before the CD matures they will be penalized for it, which can wipe out any earnings. On the other hand, CDs are insured up to $250,000, so by and large there is no risk of losing your money.
Before you commit to buying a CD or any other investment vehicle, be sure to speak with a financial advisor. He or she can walk you through all the potential risks and returns of CDs and other financial products. The more information you have the more likely you will be to make the right investing decisions.