Bull Certificate Of Deposit – Investing In the Stock Market Without Risk
A certificate of deposit is an investment instrument which provides you an interest rate which will be higher than a conventional savings account with no risk associated with it unlike mutual funds and the stock market. The only difference would be that you must stay invested for a couple of years during which you will not have access to your money.
The problem with conventional certificates of deposits is that you are not exposed to the fluctuations in the stock market. Your interest rate will stay constant for the entire period during which you will stay invested. And then if you withdraw and reinvest, you will get the prevailing interest rate. This is where the bull certificate of deposit differs from the conventional one.
The bull certificate of deposit is one whose interest rate will fluctuate in direct correlation to an underlying market index to which it is pegged. This type of a certificate is used by investors who want to be exposed to the stock market but at the same time do not want the risk associated with investing directly in it. This sort of certificate will give a minimum return no matter what the state of the market. But if the market is on a high, you will reap the benefits from it.
The bull certificate of deposit is like any other CD apart from this one difference. It is insured by the FDIC just like all other secured CD’s. But you have to adhere to the maximum limit set for each individual. The maximum limit in order to be able to get insurance coverage for your investment is $250000. Hence the certificate of deposit remains one of the safest ways to invest your money.
Even if you go in for a safe bull certificate, remember to diversify your portfolio. In a bad market scenario, your certificate will only yield you the minimum interest rate that was promised. In such a case, your returns will be way lower than a standard savings account. In order to protect yourself from such shortfalls, you need to diversify. They say that the best mix would be a fifty-fifty strategy where half your investments are solid assets and the other half will remain high risk market driven instruments.
You have to understand that investments are not always stable. They are transient entities. It is necessary to periodically monitor your investments in order to ensure the maximum dividends are reaped out of the same. Having a savings account is the most dormant sort of investment. There is no need to touch it for as long as you do not need the money. But the thing is that it will not hedge against inflation which results in rising costs. Value of money will go down in a couple of years and your savings account would just have caught up with that but would not have added to your asset base in any way. Hence there is a need to diversity your investments.
