Advantages of a Certificate of Deposit

Certificates of deposits, also commonly referred to as CD’s, have a number of advantages that attract many different types of investors. One of the primary advantages that investors look for when investing is investments that deal with a low amount of risk. Certificate of deposits offer investors a way to invest their money with low amounts of risk. People who have some money set aside and are not planning to use that money for a period of time are advised to invest in a certificate of deposit. Another advantage that certificate of deposits has is the amount of interest that investors will make with this type of investment.

CDs pay more interest to the investor than traditional savings accounts do. During rough economic times, many investors will dump money they have set aside into a certificate of deposit. Interest is earned during the life of the CD at a fixed rate. Another advantage that investors will experience when investing in CDs is the amount of insurance that is associated with this type of investment. Since CDs are issued by banks and other financial institutions, they are insurance by the FDIC. This amount of insurance promotes a peace of mind that many investors look for.

CDs are dependable and have very little risk associated with them unlike traditional investments like mutual funds and annuities. Mutual funds and annuities are considered riskier investments, and investors will hedge against those risks by also investing in a certificate of deposit. One other aspect that promotes advantages with CDs is how they are funded and guaranteed by the issuer. When investors purchase certificates of deposits, the money is used by the issuer of the CD in areas that promote and generate growth. In other words, the money is used wisely by the issuer of the CD in order to make money as well.

Since it is in the best interest of the bank to use the money wisely so that they too can earn a return, investors will basically be guaranteed their investment. This amount of security is sought after by most investors when developing a diversified portfolio. Other investments that impose a certain amount of risks will need to leverage by more secure investments in order to cover any possible losses. Another advantage that certificate of deposits have is the minimum required to buy a CD. Many financial institutions that offer CDs make them extremely easy to obtain. Some banks offer CDs for $1,000 which is an amount that most people are able to afford.

CDs are used by low income individuals to wealthy individuals as well. These investments cover a wide variety of income levels that help a bank or a financial institution generate a return for their corporation while providing interest to their investors. It’s a win-win situation that is highly secure, which is a rare seen type of transaction in the world of investing. Probably the biggest advantage of all that investors will experience when purchasing a CD is the ability to do so without using a broker.

Investors who purchase CDs without a broker will save a significant amount of money on broker fees. Broker fees can be quite expensive depending on the brokerage firm and many smaller investors can make the most out of their investment by going around the broker process. Buying CDs can also be done easily online. Anyone can open up a CD account and make an investment. CDs are considered one of the most popular and easiest ways to invest money. If you have some extra money lying around, and you aren’t planning on using it for awhile, it’s highly advisable that you purchase a CD to earn interest on that money.

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