Are Certificate of Deposits (CDs) a Good Investment Opportunity?

Certificate of deposit accounts are common investments offered by banks, credit unions, and other financial institutions. CDs are time deposits that offer a fixed interest rate in return for a fixed investment length of an agreed dollar amount.

But are certificate of deposit accounts truly good investments? The answer is yes, they can make terrific investment opportunities. Here are 4 reasons why CDs should be included in any investment portfolio:

1. CDs are Safe Investments

One of the greatest features about a CD is the safety. The FDIC fully insures deposit accounts for qualifying banks. This amount covers up to $250,000 per individual, per bank (as of 2011). This means that investors can rest assured that their funds are safe and secured, and fully backed by the FDIC. This is a great option for investors who want a low-risk investment.

2. Investment Earnings Amounts Are Guaranteed

The amount of money you invest is nearly guaranteed, so long as you do not withdraw the funds prematurely. Since the interest rate is listed in the deposit account terms, you will know your return on investment before you even invest the funds.

This makes CDs far more predictable than investing in money market accounts, mutual funds, or stocks--where the return on investment is often uncertain.

3. Interest Rates Are Competitive

Deposit accounts usually boast higher interest rates than savings or checking accounts. In fact, some of the highest CD rates have been near the 20% mark. Of course, rates will fluctuate wildly depending on economic conditions.

Rates are often based on the treasury rates, and so in times of bad economic conditions, the rates tend to be low, while times of economic boom usually lead to higher rates. They can even sometimes out-perform stocks or bonds, which makes it a much more favorable investment.

4. Flexible Deposit Lengths

Deposit accounts also offer very flexible investment lengths. Some banks or credit unions may offer terms as short as 1 month, or as long as 10 years, with many lengths in-between.

This is perfect for those wanting to customize the investment to suit their lifestyle needs. For example, a college student may want to save some money until graduation. In this case, a certificate of deposit would be a great investment choice, as he or she can select a deposit length that suits their needs.

Conclusion

If you are considering making an investment in a deposit account, CDs are a great choice. Always make sure to shop around, and select a bank with the terms that best fit your needs.

If you want more great tips on how to invest in certificate of deposit accounts, then please visit my website. You can also learn great tips on how to secure the latest cd rates, and more.

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.