2006-09-06 15:33:47 · 6 answers · asked by Michael M 1 in Business & Finance ➔ Investing
They won't come and hunt you down or anything, but in investments losing your money is the risk.
2006-09-06 15:40:02 · answer #1 · answered by Nelson_DeVon 7 · 0⤊ 0⤋
It is risk free in that in is federally insured in case the bank goes under. Other than that you are just tying your money up for a predetermined length of time and cannot cash in on a higher rate of return should rates go higher. Right now you can get as good of a rate as with a short term CD without tying your money up by opening a money market account at one of the online banks such as Etrade Bank or Citibank. That way you stay liquid and have the same protection by the FDIC (insurance). The advantage of tying your money up for a longer term would be if you felt rates were going down and you wanted to insure a constant return. For now, economic indicators say stay liquid. Rates won't be going down at least this year.
2006-09-06 22:42:04 · answer #2 · answered by Debbie P 2 · 0⤊ 0⤋
That depends what you mean by 'risk'.
If interest rates rise, your money is locked in at a lower interest rate. If you were valuing the asset to 'market prices' you'd value the CD as having lost money when interest rates moved - if you could sell CD's, it would be worth less then what you paid.
If inflation is higher then expected, the real value of the money at maturity is less then expected. This is a truly meaningful risk - the value of your money is more important then the nominal (i.e. what's written on it) value.
CD's have no uncertainty, but they do have risk.
2006-09-08 09:10:54 · answer #3 · answered by kheserthorpe 7 · 0⤊ 0⤋
No investment is risk free. You will get your money back in a CD, but if inflation increases, your money will be worth less than when you invested it, so you can lose money to inflation. If your CD pays 4% and inflation is 5%, you have lost 1%.
2006-09-06 23:38:23 · answer #4 · answered by Califrich 6 · 0⤊ 0⤋
If you keep it until the mature date, you get back what you put in, plus the interest rate at the time you purchased the CD. You only lose money if you withdraw the funds early.
2006-09-06 22:48:16 · answer #5 · answered by HDB 7 · 0⤊ 0⤋
The textbook answer says No because it is not backed by the US Govt but I think that you can feel very very safe with this type of invesment backed by the FDIC and less than $100000 at 1 bank
2006-09-06 22:43:50 · answer #6 · answered by ck-cfp 2 · 0⤊ 0⤋