How to make a CD investment
Banks offer CD options to their clients. CD translates as Certificate of Deposit. This is a form of investment that is rapidly gaining popularity. The idea is competing with the traditional savings accounts. There are several benefits of investing funds in a CD. The rates of interest are much higher compared to ordinary savings accounts. But this increase does not really involve very risky investments. Funds invested in a CD are quite safe. The rate of interest offered on a CD investment depends on the economic climate at the time. CD rates also vary from one bank to another.
The higher the investment in a CD; the better are the returns. There is a lot of information on CDs online. Clients like to read up about how exactly a CD works before they invest in one. There is also a time factor involved here. People may invest in a CD for different durations of time. The time could vary from six months to one year to ten years. Obviously, the longer you invest in a CD, the higher are the chances of returns. The bank basically invests your money in the money market. CDs are also referred to as money market accounts.
Starting the process:
This is quite simple really. The bank manager will give you a short and simple form to fill out. The form will have details of how much you wish to invest and for how long. There are usually penalties for withdrawals before the expiry of the duration. But in an emergency situation, one has access to the funds at least. Once the time has lapsed, the investor has two options. He may either choose to withdraw the amount. He may also opt to plow it back into the CD for the next duration. These instructions are also specified in the form. CD rates fluctuate according to the mood of the money market. But seasoned financiers and investment gurus usually handle CD investment in the market.
Comparison with savings accounts:
Saving accounts present a medium stage. They are somewhere in between a CD and a checking account. But modern banking is evolving. Savings accounts now offer attractive rates of interest. Savings accounts may also be linked to debit cards. Reputed banks are working on revamping savings accounts. The choice between the two depends on your affordability and your profile as an investor. If you are looking for a safer investment, you can opt for savings accounts. On the other hand, if you are open to a monitored speculation, then investing in a CD is an appealing option
Understanding your investment:
Reading up online is a very good way of getting familiar with banking jargon. Another method of knowing where your money is going is by taking the advice of a professional financial advisor. He could either belong to the bank or work independently. They will explain in detail what a CD investment is all about. Knowledge is power as far as investments go.