Basic awareness for first time buyers of CD’s
One of the best ways to ensure you have enough saved up for your future is by starting off early and investing in the right options for the right returns. For many years now, the certificate of deposits has been the right tools for people who want to have a nest egg for the future. However, with innumerable options flooding the financial market by the day, the first time investor in the CD will have more on his plate than he can handle. The only way to ensure the right choice is made is by ensuring all the basic concepts are in place before setting out to make the investment.
Business Administration’s Assistant Professor, Don Taylor, who is also an investing advisor mentions that there are three critical factors that every person investing in a CD should keep an eye out for. The three factors that need to be taken into thought are convenience, liquidity and yield. According to Taylor, the first basic question that needs to be answered is whether the investor has any concerns with liquidity. If you are sure you may have to withdraw the invested money before term maturity, you stand to lose more than you gain since you will have to pay a hefty fine to the financial institution. According to a particular study, in over 92 percent cases, the banks have deducted the fine from the principle deposited clearly indicating you lose more when you don’t plan well.
One of the interesting aspects to make note of is that banks that have most of their transactions either on telephone or online offer higher rates of interest as compared to other regular banks that offer various other facilities such as ATM transactions, debit cards and many more. If you are investing in a certificate of deposit, you do not need the facility of ATM transactions and debit cards since the money is sure to be locked in for a particular period of time chosen by you. With that being the case, it is wiser to opt for banks that offer higher rates of interest as compared to others who offer facilities that you may not even need to use. Discover Bank’s deposit products Vice President, Steve Olszewski, states that online banks have a distinct advantage over their brick and mortar counterparts when it comes to CDs, mainly because of the interest rate they offer.
