Having a considerable investment amount? Read on

A Jumbo Certificate of deposit (CD), as the name suggests, is a certificate that has a large denomination. The value of this denomination is a minimum of $100,000 in general cases. Generally when a person invests a large amount of his hard earned money in one venture, he is bound to be associated with a huge risk. But the case with Jumbo certificate of deposit is entirely different. The Jumbo certificate of deposit is linked with a low risk factor. Also, it provides stability to the investment of the investor. Thus, it is generally preferred by investors because of its favorable factors. A conventional Certificate of deposit is similar to a Jumbo Certificate of deposit in its dealings.

In a Jumbo Certificate of deposit, the principal of an investor is being locked up (fixed) for a period ranging from three months that can last up to a period of six years. Thus, these certificates of deposits are also termed as “timed deposits” because of such a characteristic. When the investor pays the principal, he is bound to get a specific amount of return and it is considered to be a guaranteed amount of return. The percentage is fixed for the return that is received by the investor. When the Certificate of deposit matures, the return is to be paid back by the investor. Generally, the Jumbo certificates of deposit are not insured by the Federal deposit insurance corporation.

Benefit of availing Jumbo CD:  

The most important benefit that is associated with the Jumbo certificate of deposit is that it can yield a high rate of return. This rate of return can be much higher than the returns that are obtained otherwise, from the other sources like savings accounts and money market operations. The return is directly linked with the locking period of the principal of the investor. The longer the maturity period of the certificate of Deposit, the higher would be the return availed by the investor. However, due to the locking period principle associated with the jumbo certificate of deposit, the liquidity that is associated with this investment is generally not to a fair level. The other saving schemes do have a higher level of liquidity linked with them.

You should not conclude that you won’t be able to withdraw any principal because it is locked. This is a misconception. Rather, the issue is that if you wish to withdraw the principal before the pre determined time period, you would have to give a penalty. Also, you may get a lower return because of this withdrawal of the principal at a starting point. This penalty can be much higher in a jumbo certificate of deposit and this is the reason why people don’t withdraw a portion of their principal before the maturity period as once the locking period would end, they would receive a higher return. It is generally beneficial for those investors who have accumulated huge wealth and who wish to make the correct use of this wealth.