With the turbulence of today’s investment market, many investors are concerned about where to place their capital. Balancing the need for growth with the desire for capital preservation with capital appreciation, many investors are turning to CDs. CD rates vary with the maturity dates offered giving investors choices to consider within their portfolio based upon their individual needs.
These are some of the benefits of CDs in today`s market:
Liquidity- CDs offer investors liquidity, allowing them to capture their principle in a short period of time if needed. But, there are often penalties associated with an early withdrawal, so it is advised to take this into consideration prior to making a withdrawal. Many investors choose a CD laddering strategy, with CDs maturing at varying intervals to help reduce the likelihood of a withdrawal penalty as there is a CD maturing every month or every quarter as they were established.
Maturity Selection- Each investor has different financial goals, risk tolerances and investment time frames. Therefore, not every investment is suitable for every investor. One of the largest advantages of a CD for an investor is the diverse selection of CD maturity dates. For example, an investor may select to have a CD maturity of 6 months as they have a short term financial need. Or, an investor who is seeking capital preservation for a longer term goal may select a CD with a 5 year maturity as it offers a higher interest rate. This maturity flexibility makes CDs an attractive investment option for virtually every type of investor.
Capital Preservation- With today`s turbulent market, many investors are concerned with preserving their principle investment amount. As a result, investors are seeking investment vehicles that offer insurance and the ability to preserve their capital. While some investors are maintaining their investment capital in cash, others see the potential for loss due to inflationary risk and are seeking alternative cash investments. CDs offer preservation of the investor`s principal investment amount up to a certain level under the FDIC insurance regulation.
FDIC Insurance- CDs offer investors FDIC insurance up to $250,000 per account, per institution giving them peace of mind in today`s investment market.
Interest- CD rates are often higher than the rates offered to investors on other cash investments. CDs offer a variety of CD interest rates depending upon the individual CD selected. CDs with shorter maturities often offer interest rates that are lower than longer term CDs. And, many CDs offer interest rates that are greater with a larger investment amount. When choosing a CD, it is important to select the best CD rates the fit within your long term investment plan and your overall risk tolerance.
CDs offer a variety of benefits for investors during this turbulent time in the investment market. With varying investment time frames, risk tolerances, total investable assets and overall financial goals, the diverse choices associated with CDs make them attractive investments for virtually any investor.