Choosing the Risk-Free Investment
The Federal Deposit Insurance Company is the leading institution in term of insuring the money of bank depositors. Of course, whatever the cause may be, no person would like to lose his hard earned money. That is exactly the reason why FDIC was created—to protect these monetary assets from natural calamities and disasters, robbery, and other factors that may endanger the investor’s money. In fact, even the investor himself might be a danger to his money (i.e. to prevent himself from spending the money on unnecessary things). So if you want to prevent any of these things, read on.
If you have a large amount of money, then consider putting it in a place where the FDIC can insure it. The thing is that this institution cannot insure your money if it stays with you at home. Note that there are more risks involved when your money is kept at home. One reason is that your house is not equipped with the right facilities to safe keep your money.
Therefore, if you would like your money to be insured by the FDIC then go to the nearest bank and open a savings account. It is the simplest way to protect your money. Opening a savings account is also a fast transaction. Aside from insuring your money, you also get added interest per month on your deposit. Isn’t that a great bargain considering that all you wanted is to keep your money safe?
You might be eligible for a high yield savings account if you deposited a proportional amount of money. But this is not the only multiplier in the equation. Because savings accounts are liquid assets (assets which you can withdraw anytime without constraints), it is difficult for banks to give a higher interest on your deposit. Thus, it may be limited to about 5% or less depending on the bank where you opened your savings account.
On the other hand, if you want to make more money using your spare cash, why not buy a certificate of deposit? CDs work in the same way with savings account. It is an easy, fast and reliable investment, which is also insured by the FDIC. Think of savings account as a normal deposited amount in a bank—only time-locked. Therefore, there is a specific maturity date before the money can be withdrawn with the corresponding interest rate.
CD rates are usually higher than that of savings accounts because of the contract that the money cannot be withdrawn before the maturity dates. This allows the bank to use the money for other transactions such as in granting loans to loan applicants. So even before the maturity date of your contract expires, the amount you invested in that bank already earned its corresponding interest, plus the profit of the bank through money lending and other business endeavors.
CDs’ are good options, but only if you don’t need to spend the money you are investing in. Even if there is a way to sell the CDs’ in secondary markets, it is hard to find a buyer in a couple of days without setting a bargain price.
The end lesson of this story is that both of these investments keep your money safe. The low risk associated with savings accounts and CDs’ is the primary reason why a lot of people still engage in them despite the presence of other high-yielding investments. If you are someone who does not want to venture to the riskier side of investing, then choose any of these two options. Either of which you are picking a great option.