CD Rates Are Rising! It’s Time to Invest in Non-Traditional CDs, Recommend Experts

The fed rates are expected to continue their uphill climb during 2015. This is good news for investors who have put their savings in financial instruments connected with federal rates like certificate of deposits. Given the possible rise in rates, most investors are considering investing in different CD products to ride the wave of rising CD rates.

But not all CD options are great for investors. Investors are advised to look beyond traditional CDs to secure the best investment option for them. A number of non-traditional CDs or hybrids offer the best CD rates as compared to traditional ones.

The problem is that most large banks and financial instruments do not offer such non-traditional CDs. Investors have to look at regional banks, credit unions, and community bank to invest in the instruments. Some of the non-traditional CDs that offer the best return potential for investors include index-linked CD, Set-up CD, Liquid CD, Add-on CD, and Bump-up CD.

Indexed linked CDs, also known structured CDs or market-linked CDs, are tied to the returns of a specific index like S&P 500. Setup CDs increases at a predetermined rate during a specific duration. A liquid CD, on the other hand, allows saver to withdraw that investment without any penalty to invest in their funds at higher CD rates. Add-on CDs allows savers to deposit additional fund in their account. Finally, a Bump-up CD gives investors the option to increase the CD rate of their existing CD to the prevalent rate to earn higher returns on their savings.

These hybrid and non-traditional CDs are the best investment option to benefit from rising CD rates. In the past, they served a niche market. Only a handful of investors invested in these non-traditional CDs. Most individuals were not even aware about these investment instruments. And with the low fed rates, it didn’t make much of a difference in terms of returns. But with the CD rates expected to rise again; financial pundits are advising investors to consider these nontraditional financial instruments.

However, investors should be careful when investing in these non-traditional financial instruments, according to Carry Guffey CFP Board ambassador. Investors should clearly read the fine print before investing in these non-traditional financial instruments. This is especially true for index linked CDs. Investor should be fully aware about the risks of investing in these financial instruments before putting their money in the CDs.