Should you invest in short or long term CD?

In a business, it is important that you know what customers need and what makes them patronize a product. If you are able to do this properly then you’ll make it big in the market. When prices increase, the public tends to be more careful with their expenses and start saving but when prices decline, there they’re back shopping again. This could be seen as a good analogy on certificate of deposits or CD’s. If interest rates are high, then more people will see it as good investments causing them to purchase new CDs.

Of course interest rates are very important in determining the level of profitability of a CD. But if you are thinking of investing, you need to remember that there are other factors to consider. Once you understand the ins and outs of this investment tool, then you can begin to question about other things such as the credibility of the issuing institution. Through education, you can see which institutions offer the better deal.

If you’ve made a little research about certificates of deposits, then you know that not all CDs are the same. Some offer higher returns. Some people may recommend investing in short term CD, others prefer the long term. Which should you choose? Here’s a guide you can follow:

Typically, investors prefer short term CDs if they feel that the rates will go up soon. This way, they can reinvest their money when rates are higher (since the money won’t be tied up in a long term investment). But in case the market and the rates have high chances of declining then go the other option. With the high rates given by banks to depositors to long-term CD’s, most investors go for it instead. To keep your money safe, chose a bank insured by FDIC so in case bankruptcy is on the rise, you still get protected. How do you know if rate are going to increase or decrease? Some banks will issue memos to their clients, others will require you to use a monitoring service. Of course, you’ll need to have a little knowledge about interest rates and what causes them to move.

The greatest benefit seen with short term CD’s is that you can already access your money in just a short period of time plus you can already enjoy your profit. The only discouraging thing about short-term CD is that the rates are lower, thus investors who are after big returns aren’t a fan of short-term CD’s.

Try to shop around first before you finally make your very first investment.