Are High Yield CDs Still a Good Investment in 2010?

Are high yield CDs still a good investment in 2010? That's a good question. But, the answer isn't an easy yes or no. Investing in high yield CDs depends upon your individual situation. First of all, let's define what a high yield certificate of deposit is. In simple terms, it's a CD that will give you a good return. But in 2010, how high of a yield are we talking about? Let's take a closer look.

One of the best websites for comparing CD rates is Bankrate.com. To get a high yield certificate of deposit, you are going to have to invest your money for a longer period of time. Investing in a one-year CD is going to give you a measly CD rate of less than 2% APY (Annual Percentage Yield). So, the first thing you need to decide is whether you can afford to invest your money for a longer period of time. If you think that you will need your money within the next five years, a high yield CD is not for you. Assuming you can invest your money for five years, currently you can get a CD rate of between 3.15% and 3.55% (APY) with as little as $1,000. Now here is where the guessing comes in. In the next five years, will CD rates rise or fall or stay the same? CD rates can't go very much lower. If the Federal Reserve keeps its fund rate low, then certificate of deposit rates won't rise. But, if the economy improves, the Federal Reserve will raise the fund rate and CD rates will slowly climb. There is no way, short of a crystal ball, to know when or how fast the rates will rise.

If you have enough money to invest in CDs, your best bet is to invest by laddering. For instance, invest $1,000 in a one-year CD, $1,000 in a two-year CD and so on until you get to a five-year CD. When the one year CD matures, you would invest in another five-year CD. As each CD matures, you would do this same thing. This spreads the CD rates out over a number of years and is a safer way to invest.

Another way to invest in a certificate of deposit, is look for a bank that is offering the opportunity to raise your rate. Currently, Ally Bank is offering a two-year CD at an interest rate of 2.10% APY and will allow you to raise your rate once during the two years. So if interest rates rise, you won't lose out.

For more information on CD Rates [http://Rates.cd] visit [http://www.rates.cd]

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