If you are looking for a safe investment and you have between $ 100 - to invest $ 1000 you should consider a certificate of deposit or CD. When buying a bank CDs are federally insured up to $ 100,000.
When you invest in a certificate of deposit, you are lending your money to the bank for a certain period at a fixed rate. At the end of that period, the bank pays you back your investment with the interest you've earned. The annual interest rate is reflected by the annual yield or APY.
There are to consider before investing in a CD. Various details Search first as the CD will mature out? Banks offer certificates of deposit with maturities ranging from 3 months to 10 years or more. Figuring out how to safely invest and how long you feel you can only make that money so that it earns interest. Also, make sure you have the expiration date in writing.
Secondly, you want the annual percentage rate (APR) you know you deserve on your investment. Larger investments for the longer term usually earns the best interest. However, even a small investment you earn a higher interest rate than a traditional passbook savings account.
Then find out how the interest is compounded out - daily, monthly or yearly? Daily compounding is best because it gives you more interest. You can shop for the best CD rates at http://www.bankrate.com or check with your personal banker.
Shopping on the Internet, I found rates for a $ 1,000 one-year CD in my area, ranging from 2.96 to 3.97 and from 3.00 to 4.05 APY and April. So if I invested $ 1,000 on April 2.96 at the end of the 12 months that I paid $ 1,030.00 by the bank (figures computed with interest compounded monthly). That same $ 1,000 invested at a rate of 3.97 in April would return $ 1040.43.
Interest rates are usually locked in for the duration of the CD, although some banks allow to take advantage of higher interest rates by converting your CD. This type of CD is called a "step up" CD. In general, banks will only be "step up" once during the term of the CD.
What happens if you withdraw your money before the certificate of deposit matures? Your bank will impose an early withdrawal penalty, which may vary depending on the duration and the amount invested. It is important to invest only money you can truly afford to leave for the duration of the CD only.
As with any investment, make sure you understand all terms, fees and any penalties before you buy.
Author: James H. Dimmitt
James is editor of "your credit", a free weekly newsletter with tips to help you manage your personal finances. You Subscribe today and receive his e-book? IDENTITY THEFT-How to avoid becoming the next victim?? and other cost-saving bonuses by visiting
No comments:
Post a Comment