Making the most of rising interest rates with variable CD’s

Certificate of deposit is a savings plan that helps save for tough times, and secure the future. There are many kinds of certificates of deposits that are available these days, so the investor has many options to invest today. Certificates of deposit differ in terms of interest rates that are offered and the time period for which the investment hold. Fixed CDs are those that offer fixed interest rates over a period of time irrespective of the fluctuations in the market. Once the investor locks in the money in a particular CD, then until the CD matures, neither the money can be withdrawn nor the interest rates changed.

A variable CD is slightly better than the fixed CDs in this respect. The investor gets to enjoy the complete benefit of fluctuating interest rates, which can work both to the advantage and disadvantage of the investor. The interest rates issued on the CD can be changed once the interest rates in the market improve. So the investor will actually not know the amount of profit accumulated at the end of the time period. But this can be a disadvantage is the interest rates drop. Then, the interest rate on the CD is reduced too, which makes the profits go low. This can be a particular problem if the interest rates drop immediately after the investment is made and does not rise in the near future.

But if the market has all the tendencies of rising interest rates for over a period of time, investing in a variable CD will let the investor take the full benefit of every significant interest rate change. The interest rates depend on financial institutions offering the CDs too. Before choosing the type of certificate of deposit, it is a good idea to choose an investment broker or a sound financial institution that offers the best interest rates in the market. Every financial institution will have a different structure of variable CD, so it is better to check the variable CD rules, restrictions and interest rates in the bank that the investor wishes to invest in.

The key to choosing a great investment plan is to weigh the current situation in the market and invest money according to the interest rate predictions for the next six months to one year. Also, the financial institution chosen makes a lot of difference to the profit obtained. Variable CDs work the best when the interest rates are on the rise and the financial institution offers the best interest rates for the investment.