Cds & Investing

Let's look at what types are available to you.

First we have what they call a traditional CD. With a traditional CD you would deposit a set amount of money for a set term with a predetermined interest rate. You can either cash the CD when it matures or you can roll it over for a second term. Pretty much every financial institution will let you add extra funds during the term of the CD or at the point of roll over.

Next we have what is called a bump-up CD. With a bump-up CD you can take advantage of the rising rates. An example of this would be if your bank offered a set rate for a 2 year CD and the interest rate rose any additional points you would have the option of telling the bank you want to add the extra percentage for the term of the CD.

Next we have a liquid CD. A liquid CD is a type of CD that will allow you to withdraw money from it penalty free. The only requirement is that you must maintain a minimum balance to be able to draw on it.

We also have a zero-coupon CD. A zero-coupon CD is one you purchase at a discount. The words zero-coupon mean interest free payments. These are identical to the bonds of the same name. There is also a callable CD. A callable CD is one that can be pulled from you by your financial institution after the call-protection expires on it and before the CD comes to maturity.

You can also find brokerage CDs. A brokerage CD is strictly sold through a brokerage company. These CDs often pay out at a higher interest rate than a normal bank  but not least we have high-yield CDs. High-yield CDs are the type that the banks compete for. In the end a CD can be a great investment.
Categories : Investing

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