Keeping Your Money Safe and Profitable Through Certificate of Deposit

Nowadays, there are several financial institutions that offer several kinds of services. With the economic ordeals that hit almost everyone, people who were able to save some money are being meticulous in choosing which financial institution to keep their money. Few decide to just keep it at home instead people will always look around for the best financial institution that will ensure their money is safe and earning the most. As much as there are numbers of financial institutions, the types of accounts that you can open also varies.

If you have a significant amount of money to save and you are confident that you will not need it for quite some time then you will be interested in buying certificate accounts. It is a type of investment with fixed deposit structure that you can acquire either from banks or lending institutions. Investors need to deposit funds in a certain timeframe which ranges from 3 months to sixty months or more in order for their money to acquire higher interest rates. Similar to the conventional savings account, certificate of accounts are protected and insured by government agencies.

Banks and credit unions have set specific minimum requisite amount of deposit for people who are interested in buying certificate accounts. Naturally, if you want your money to acquire higher interest rates, you should make higher deposits. In return for the deposit made, the buyer gets a certificate that indicates the necessary details to seal the agreement such as term of deposit, interest rate and the maturity date.

When the deposited money reaches maturity, the principal amount and the earned interest will be awarded to the depositor. In order for the banks and credit unions to keep their business through the number of clients retaining their deposits in a long term investment, heavy penalties are imposed to early withdrawals. Such penalties can be of different forms; either through interest rates earned on a quarter or it can be the overall interest rates for the whole duration of the deposit. It depends on which type of financial institution you deposited your money to. So as not to repel investors, some banks have introduced a different structure of certificate of accounts giving its investors the flexibility of making use of their money in a staggered basis so they can use it in some other purposes.

It is wise to look around before letting your money go to any financial institutions. You are not giving your money away, of course, but the fact that your money has the tendency to sleep with low interest, you might as well find the best options of saving and the best place to keep it. Identify your goals with their corresponding time lines in order to come up with a better decision that has been well thought of before buying certificate of accounts.

Unless you are truly confident that you will not have a need for the money you will be using to buy the certificate of account, consider finding other options that will not impose any penalties when withdrawing your money. Make sure to discuss penalties with your bank or credit union so you are aware of what you will lose in case you have to withdraw your money earlier than the maturity date.

Savings accounts San Luis Obispo can be found at top-ranked, local credit unions. Check into your different options at sites like http://www.coasthills.coop/.

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Safe Investments Guide - Keeping Your Money Safe - Part II

In this turbulent times people are looking for safety. In an earlier guide we focused on CDs and Treasuries. Treasuries are at their lowest in history. There are some advanced traders that make short-term bets on the rate movement, but outside of that people are looking for yield and safety. Here is Part Two with a focus on Municipal bonds. There will be a Part Three that focuses on more complex Certificate of Deposit Products.

Municipal and Build America Bonds

Municipal (Munis) and Build America Bonds (BABs) are offered by cities, counties, states, and other regional governing bodies. Note, they are not guaranteed although default is extremely rare. Of course, in this economy it is becoming more of a concern. It is because of this risk that they have pretty good yields. Depending on where you live and where you buy the bonds, there can also be state and/or federal tax advantages. Munis and BABs typically have longer-term maturities such as 12-years to 30-years. There are Revenue Bonds and General Obligation (GO) bonds.

GO bonds are typically thought to be safer because they are based on tax revenue and the ability of the municipality to increase taxes if necessary. Revenue Bonds are paid back with the revenue that the project creates such as an airport parking lot or baseball stadium. BABs are a new type of municipal bond that is fully taxable, thus higher yields to you, but lower yields to the entity. The federal government underwrites a portion of the interest thus the cost is lower to the entity. I could write a whole article on ratings (probably will), but generally you want the rating in the A range. S&P goes from A- to A A A (highest). Moody's is another popular rating agency and their top ratings go from A3 to A a a.

Like Government agency bonds, Munis often have call periods. This means that if rates go down, the entity could close the bond and send you back your principal and accrued interest. This creates an interest rate risk because you are left having to invest at lower rates. Munis also have term risk due to a potential rate increase; you could have the bond for the duration. If rates rise substantially you would be losing out. And again, although rare, they do have default risk. Some bonds do carry a guarantee offered by a private insurance company. That usually gives it a boost in its rating.

This article is for informational purposes only and does not serve as investment advice or as a recommendation of the products described within. The opinions herein are the sole opinions of the author.

Chris Duncan is a FINRA Registered Representative. He specializes in helping clients find the best and highest CD rates nationwide. His clients include individuals, financial institutions, corporations, and public agencies. Visit us at for more best investment rate info or for more certificate of deposit help.

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