Why CD’s are considered safe investment options?

CD rates also known as certificates of Deposits are provided to consumers by banks and are identical to a savings account. Generally they involve no risk, though what makes them different from a savings account is the fact that they usually include a fixed term with an interest rate that is also fixed.

When a certificate of deposit has a very large denomination it is termed as a Jumbo CD. Believed to be stable investments that have a low risk especially for large investors, the features of this CD are generally similar to a conventional certificate of deposit.

Before a CD matures and post the expiry of the call-period protection, investors can benefit from a Callable CD. It is the kind that an investor can call-away in the above mentioned duration. Generally, a callable CD is offered by the bank so that the risk of interest rate can be shifted to the depositor and this type of CD may have a higher outcome in comparison to the same maturity though minus a call provision. 

Keeping to their namesake, Brokered CDs are those offered by financial institution after marketplace surveys to brokerages. Upon ascertaining the CDs with the best rates, consumers can keep their deposited money for a particular period with a bank after certain agreements.

A Short term CD is the one in which investors can earn monetary benefits in a shorter duration. Investors must keep in mind existing CD interest rates so that they can make the most of it. Of the fixed kind, Liquid CDs empower investors to withdraw a part of the amount they originally deposited in the fixed term minus any penalty charges.

There are two main intentions of investing in a Bear CD – one for speculation and the other for hedging. A Bear CD is a type of investment where the rate of interest may fluctuate in inverse proportion to the governing market index value. In contrast despite being exposed to variations in the stock market, investors holding a Bull CD are also safe. This is mainly because Bull CDs are one in which the underlying market index value is in direct proportion to the fluctuations in the interest rates.

Also termed as a flex CD, a Step-up CD involves an interest rate that has been fixed for a certain period of time. The time duration of this kind of deposit certificate is typically a year with the interest rate thereafter gradually scaling upwards automatically to a rate that has determined earlier. Issued in the U.S. market, specifically in New York, a Yankee CD on the other hand is offered by a foreign bank’s branch. Generally it has a face value reading at a minimum of $100,000 and is negotiable.

A CD ladder strategy is a popular improvement for investors looking at gaining maximum from the high interest rates accompanying an economy that is continuously moving upwards. They opt for this strategy when they invest in financial services that have longer terms of investment with higher interest rates. Investors have the opportunity to distribute their deposits over time duration of many years. Their main aim is to deposit money for a long term while still benefitting from annual maturities.