The advantages and disadvantages of investing in a bull CD

To understand the advantages and disadvantages of investing in a bull CD, we must first understand how a bull CD is different from a normal or regular CD or certificate of deposit. In general, CDs are certificate of deposits that are almost like bank accounts except that they have a specific fixed term and interest rate. These certificates of deposits also differ from the normal fixed deposit in the principal amount that is fixed. Certificates of deposit are availed for higher principal amounts as the interest rates are also high. Fixed deposit on the other hand is done for low amounts and the interest rate is not so high. 

Once we have understood the difference between a regular CD and other savings account, we can proceed to understand the meaning of the term Bull CD.  A certificate of deposit in which there is no fixed rate of interest is called a Bull CD. The interest rates in Bull CD are linked to a specific market index and increase or decrease according to the change in this index. This also means that the rate of interest on the principal amount fluctuates in direct correlation to the market value. This kind of certificate of deposit is preferred by those investors who are looking for a safer investment avenue as well as an introduction to the stock exchanges. The best part in investing in bull certificates of deposits in case there is a dip in the market still you will be eligible for a minimum interest on the Bull CD’s. 

Advantages of investing in Bull CD

1. These are high yielding CD’s and can generate great income.
2. They are safe to be invested on as they are insured by FDIC.
3. If there is an upward trend in the market then you can expect higher returns.
4. Irrespective of the market trend that is whether it has a positive or negative trend, an investor will always be paid a minimum interest. 

Disadvantages of investing in Bull CD

1. As the interest rate on the CD depends upon the market value so if in any case the market is down so will be the interest rate.
2. In case one must have to withdraw substantial amount from the CD then he has to do so with losses.
3. The volatility of the stock market has a direct effect on the value of the Bull CD. 

A Bull CD can be made to work at your advantage if the following simple steps to identify a bull market are kept in mind:

1. As the prices of the stock begin to rise be alert to start collecting funds for investment in the CD.
2. The bullish percentage indicator points towards a rising trend.
3. After a fall in the prices of the share market the economy starts to rise and points towards the start of a bull market. 

Bull CD’s can prove to be the best investments. They are secured and you will always remain assured of a minimum return other than the principal amount. There is also the option of transferring the interest amount to your savings account. Here the investors enjoy an upper hand than as in case of the regular CD where the bank guides the future of the CD.