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Certificates of Deposit
Certificates of Deposit, also known as a CD, is a certificate from a bank stating that a particular individual has a specified amount of deposit, for a given period of time, at a predetermined interest rate. It is always a good idea to keep a certain percentage of your portfolio in investment vehicles that are risk-free. CD's meet this criteria as they are insured by the FDIC, up to $100,000. The percentage you dedicate to CD investing will most likely depend upon your age. Older investors tend to avoid exposure to risk, whereas, a younger invdividual will seek higher returns with more aggressive investments. The best investment strategy pertaining to CD investing is the ladder method. This is executed by purchasing several different certificates for different lengths of time. The idea is to not have all of your capital committed to one investment for an extended period. For example, if you have $40,000 to invest, you would purchase 5 Certificates of Deposit for $8,000 each. One would mature in a year. A second would mature in two years. A third would mature in three years and so on up to five years. This way, you would have one maturing every year. Before purchasing a Certificate of Deposit, confirm the interest rate, the maturity date and be aware of the possible penalties for early withdrawal.
Certificate of Deposits rates will vary, but seldom is the difference in domestic interest rates large enough to warrant using a different bank than you are accustomed to. International CD's are a different animal. Many nations around the globe offer higher interest rates than US Institutions. However, you must keep in mind the currency factor. If the currency of the nation you invest your CD with, falls against the dollar, it will lower your return rate. If it rises against the dollar, it will increase your return rate. I have isolated a CD from a country with a very stable economy, paying around 8.91%. Don't miss out!!!
Int'l Certificates of Deposit
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