Investments: Certificates of Deposit (CDs).

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Photos by bank notes on Pexel, Stevepb on Pixabay, and rawpixel on Unsplash.  

 When considering flexible cash investments that can earn you a guaranteed yield with minimum risk, certificates of deposit (CDs) are worthy options.  

Imagine having liquidity in your savings account while earning a higher than average rate of return on your cash.  Imagine being able to decide on a short-term or a long-term commitment while still earning good rates of return on your savings.  Imagine deciding on the ratio of liquidity to non-liquidity in your cash and earning from your choice?

CDs could be the perfect solution for you!

Whereas bonds are traded in the capital markets, CDs are retail products typically offered by your bank.  So, CDs are associated with short-term savings. Because of this ease of accessibility, people often overlook CDs as an investment option.  But consider that CDs are currently yielding 0.60% at 6 months to 4% at 5 years on annual returns (https://www.nerdwallet.com/blog/banking/nerdwallets-best-cd-rates/).  Compare this with interests on savings ranging from 0.01% to 2.25% annual return (https://www.mybanktracker.com/savings-rates-funnel?placement=rate_table-savings-paid_2&amount=25000&lm=0&msclkid=82bc0a94895013ed18d9516fecd8e30a&utm_source=bing&utm_medium=cpc&utm_campaign=Savings%20-%20SEM%20(BING)&utm_term=internet%20savings%20rates&utm_content=Savings%3A%20Internet%20Accounts). 

So, if you know that you will not need the money for a few months or a few years after the date that you open the account, why not claim the benefits of the higher guaranteed yield on your savings?  If you need the funds before the maturity date then you will have to pay an early withdrawal penalty.  But the benefits should not be overlooked:

1. The longer the CD term, the higher the interest rate.

2. CDs from FDIC-member banks are insured by the Federal Deposit Insurance Corporation (FDIC) up to the maximum allowed by law (https://www.ally.com/do-it-right/banking/cds-or-bonds-whats-the-difference/).

3. You have a government guarantee that you will not lose money (https://www.investopedia.com/articles/investing/122914/cds-vs-bonds-which-better-investment.asp).   

So, while you decide where to invest your money, remember that:

1. You can mix your portfolio with less risky bonds and CDs.

2. CDs may have greater advantages than bonds, so do your homework.

3. CDs can be used for short-term or long-term investing.

4. Don’t pay for excess liquidity.  You do not need 100% liquidity all the time.  So, earn on what you can temporarily freeze (https://thefinancebuff.com/why-investors-dont-realize-cds-are-a-better-deal-than-bonds.htmlhttps://thefinancebuff.com/why-investors-dont-realize-cds-are-a-better-deal-than-bonds.html ).  

In general, investments are designed to allow you to earn from your assets.  They can range from land and other real estate, to cash options like stocks, bonds, or CDs.  

Do not limit yourself!  Keep learning as you grow your portfolio into one that best reflects your lifestyle.  While you are selecting our best options, check out my investments in your future at http://www.lulu.com/spotlight/KeishaAMitchellPhD and https://www.youtube.com/watch?v=yHGm_Vc-MtM .

Photos by Artem Bali, Chris Lawton and William Iven on Unsplash .

 

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