Locking up savings for a near-future purchase This may include savings for a down payment on a home or car you plan to buy within five years. For example, some investors use a strategy called dollar-cost averaging, which involves spreading purchases of stocks or funds over time. In such a scenario, the money waiting to be invested could be held in CDs to potentially earn more interest than it would in a regular savings account.
Ensuring returns without market risk Investing in CDs without a future purchase in mind might make sense for those who want to avoid risking their money in the stock market. But remember that CDs are more for short-term safety than for long-term growth. For retirement savings, financial advisors often suggest an asset allocation that involves holding more stocks than bonds or CDs when retirement is decades away, and shifting to more bonds or CDs as retirement nears, to minimize the risk of losing money.
This depends mainly on your savings goals. If you want comparable rates to CDs as well as easy access to funds, a high-yield savings account might be the better option.
Compare the best CD rates with the best savings rates. Mostly down. If that seems likely, stick to regular savings accounts. A more strategic approach to investing in CDs is to split one investment into several parts and invest in multiple CDs of different term lengths at once. When each CD ends, reinvest that sum in a new CD for a longer term. This is called a CD ladder see more on how CD ladders work. Compare the best high-interest accounts. Find a bank account that can build your savings faster.
See Accounts. Pros to investing in CDs. Compared to vinyl, CDs are able to produce a wider dynamic range and more bass. In this streaming age, the album artwork seems to be more of an afterthought to consumers, at least. I always enjoyed getting a CD and flipping through the booklet while listening to it. It makes you feel more connected to the album, I think.
The portable CD player might be a thing of the past, but, believe it or not, big-time audio companies are still releasing CD players for the home. Editorial disclosure. David McMillin. Written by. David McMillin writes about credit cards, mortgages, banking, taxes and travel. David's goal is to help readers figure out how to save more and stress less. Edited By Brian Beers. Edited by. Brian Beers.
Brian Beers is the senior wealth editor at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money. Share this page. Bankrate Logo Why you can trust Bankrate. Bankrate Logo Editorial Integrity. Key Principles We value your trust. Bankrate Logo Insurance Disclosure. Dividend-paying stocks Some companies pay out portions of their profits to shareholders on a regular basis.
Peer-to-peer lending While you want to pay down your debts, others like you might need to borrow some money. Bond funds Short-term bond funds are another alternative to investing in CDs. CD vs. Are CDs worth it? Are CDs a good investment for retirement? Are CDs tax-free? ETF: Which is better? Read more From David. Key Takeaways Both CDs and bonds are considered safe-haven investments, with modest returns and low risk. When interest rates are high, a CD may yield a better return than a bond.
When interest rates are low, a bond may be the higher-paying investment. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Related Articles. Certificates of Deposit: What's the Difference? Investing Essentials Saving vs. Investing: Understanding the Key Differences. Investing The Basics of Municipal Bonds. Partner Links. A certificate of deposit CD is a bank product that earns interest on a lump-sum deposit that's untouched for a predetermined period of time.
What Is the Money Market? The money market refers to trading in very short-term debt investments. These investments are characterized by a high degree of safety and relatively low rates of return. What Is an Uninsured Certificate of Deposit? An uninsured certificate of deposit is a CD which is not insured against losses. What It Means to Be Risk-Averse The term risk-averse describes the investor who prioritizes the preservation of capital over the potential for a high return.
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