September 25, 2017

Reasons Why You Should Invest in a High Yield CD

High Yield CDsThere are a lot of different ways that you can invest your money safely and securely. High yield certificates of deposit are one great option, but they, and really all types of CDs in general, often get overlooked in a market full of stock and bond options. CDs might not offer the incredibly high returns that other options can give you, but they do provide a safe way for you to have control over your personal finances (especially ones that are insured by the FDIC). And smart investors will have a diverse investment portfolio that will allow for CDs alongside other high yield accounts.

Why Choose High Yield CDs

There are numerous choices when it comes to selecting a certificate of deposit, however the high yield CD, as its name implies, is going to offer you the highest rate of return on your investment. Generally these types of CDs come with a set term (which can be anywhere between three and thirty years) and a fixed rate of interest. Below are three of the main reasons why high yield CDs are a great investment opportunity:

  • Protected terms – There are those who may claim that having your money tied up for so long is a terrible idea. What if there is an emergency and you need the cash back? High yield CDs come with heavy early withdrawal penalties tacked on. But, for the wise investors who already have emergency money set aside, being unable to access your funds can be a good thing. Having your savings locked away means that they will stay safe and that you won’t be tempted to cash out when you just want the money (versus actually needing ).
  • Better rates – A high yield CD is going to pay out higher rates of interest than other kinds of certificates of deposit. It will also provide a better interest rate than a high yield savings account. Everyone wants better rates, and for smart investors this is the place to find them. The higher the rates the more interest you will be accumulating, and when the CD matures you will have that much more money added on to the principal amount.
  • Better laddering opportunity – Building a CD ladder means putting money in multiple CD accounts, with varying maturity dates, instead of a single deposit account. The different term lengths mean that your funds can be constantly maturing and reinvested. This is a great way to always ensure that you are getting the best rates. This CD ladder strategy works well with regular CDs, but the returns are even greater when investing in high yield CDs.

Conclusion

Secure InvestmentThe fact is that high yield certificates of deposit are a great asset to add to your investment portfolio. If you have enough extra money set aside for emergencies, usually about six months worth of salary, then putting some of your other funds in a long-term plan is certainly worth the reward. And just remember that CDRates.org is a great resource for finding the best rates on high yield CDs.