Certificates of Deposit or CD’s are one of the safest investments you can make. CD?s are FDIC (Federal Deposit Insurance Corporation) insured which means that you are protected against loss up to $100,000 if a FDIC-insured bank fails. What you are really doing is loaning your money to the bank and the bank is paying you interest on the money you loaned them.

CD’s typically offer a much better interest rate than a savings account or a money market investment and you can invest in a certificate of deposit for as little as $500. A certificate of deposit is an excellent way to save money. However, you?ll be tying up your money for whatever period of time you choose to invest. Certificate of deposits are available for purchase at banks and savings and loans institutions although some brokerage house are now offering them as part of their investment packages.

How Do Certificates of Deposit Work?
When you purchase a certificate of deposit, you invest a fixed sum of money for fixed period of time six months, one year, five years, or more and, in exchange, the issuing bank pays you interest, typically at regular intervals. The longer you commit to with your CD, the higher your yield will be. When the certificate of deposit term is over, you can withdraw your principal and the interest earned or you can roll over your certificate of deposit, which means the money is reinvested in a certificate of deposit for the same term at the prevailing interest rate. How much money you make with a certificate of deposit depends on how much you invest, the length of your investment and the interest rate being offered. Don’t feel obligated to purchase a certificate of deposit at the bank where you hold your accounts. Find the best rate for the money you want to invest by shopping at banks in and around your area. Sometimes, if you present your bank with a competing bank?s rate, your regular bank might match or beat the competitor’s rate, particularly if it’s a significant amount of cash.

Investing in certificates of deposit can help you reach your financial needs and goals without a lot of risk.

Source: www.global-investment-institute.com

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