Investing your hard-earned money is risky. But it doesn’t have to be a losing game. It can be a winning game as long as you play it wisely to your advantage. Start your investment career on the simplest and safest method there is—certificate of deposit.
Certificate of deposit (CD) is a savings certificate that entitles the bearer to receive interest once the account matures. It’s called simply by some as time deposit because the money has to stay with the bank for a certain period, typically one month to up to 10 years, before it can earn interest.
The interest rate varies depending on the bank, principal, and term. Usually, the interest rate is higher with a less stable bank, larger principal and longer term.
The principal has to stay with the bank until it matures. Otherwise, the bearer will not earn the interest and will be penalized.
CD is simple to understand yet only a few use it effectively.
Most would invest more than a hundred thousand for a 10-year term in the hope of earning the highest CD rate. This strategy is only advisable if you have enough money allotted for emergencies.
Other investors would put their money on separate CDs with varying terms. So instead of investing it all at once, a $100,000 can be divided into three. One can be invested on a one-month term, another for a three-month term, and the last for a six-month term.
If the CDs mature and you don’t need them yet, then you can continue on investing. The one-month-term CD can be invested up to after the six-month term expires, the three-month-term CD can be invested after the new CD expires, and so on. The goal here is to earn as much money as possible.
Another trick to earn more money is to compare CD rates from different banks and make sure you get the best deal. For detailed information about finding the best CD rates available on the Internet, visit this guide from the website BusinessPundit.