what are the risks in investing in CDs?

Question

thanks

Answer 1

The interest rates spikes upward.
Emergency need for cash because money is locked.

Answer 2

Almost zero risk to loss of principal but a real risk associated with inflation and loss of purchasing power. CDs are a very risk averse investment option and appropriate only for short term savings, emergency funds, and possibly as a small percentage of a person's overall diversified portfolio. (although it would be appropriate to increase this percentage over time as a person gets older and moves into their wealth preservation stage) The risk of allocating too much money in CDs to individuals who need the growth provided by the equity markets in order to build a sufficient portfolio for retirement (or other long term need) is that when adjusted for the decreasing purchasing power caused by inflation, their investment portfolio will not appreciate enough over the years to hit their target portfolio balance.

Answer 3

CDs are very low risk. Almost no risk of losing what you put in. Even if you withdraw the money early, you only lose the interest.

The only "risk", if you want to look it that way, is that you will miss out on making the money that you might make by putting it somewhere else. This is the same risk of just putting the money in a low interest savings account. In those scenarios, if inflation is higher than your interest, you lose.

Answer 4

Very big risk if you invest in CD online! Some online companies let you open a CD, but some are not insured.

No risk if you invest in your bank or your credit union. I would to go your bank/credit union and ask them that you want to invest in CDs. The only disadvantage is you have to leave your money that you invested in CDs for months/years depend how long you want to invest!

I use go to www.golden1.com and open a CD.

Answer 5

You can end up with a negative investment and no way to get your money out. To get the better rates, you have to lock like $10,000 or more for a year or so. Even then, it may lose worth over time. You have to factor in inflation and taxes when dealing with CDs. So if you have $10,000 CD at 6% interest for one year with 3% indexed inflation, your worth would would have grown $132 and not $600. If it was only a 4% CD, you worth would have dropped $22.

There was a big stink in California with a bait and switch. The bank would say they were offering high interest CDs, but the paperwork was for annuities.

Answer 6

What happens if you don't like the songs on your CD's? Then that's a big waste of money! haha...j/k

CD's are a pretty safe way to make a consistant percentage rate on your return. They average from 3%-6% depending where you go. The upside is you are guaranteed that percentage rate the downside is you have to keep it in for a specified length of time, such as a year or two years. If you take it out early you will be penalized. Only put money in a CD if you know you won't need to take it out in the specfied time. Now of days you can get a good 5%-6% return just in an online savings account and the money is more liquidable.

Answer 7

"Risks" as in losing money are almost negligable. CDs are almost always insured by FDIC up to $250,000 (if the bank were to do something stupid and lose all its assets).
You do face the risk that you'll need your money sooner than the time for expiration of the CD (and thus you'll lose all or most of all of your interest, and maybe even penalties on top of that) but it's about the lowest risk investment you can make.

Answer 8

Not many. If you exceed the FDIC insurance, that money is at risk. Other than rising rates, go for it. I'm getting 6.25%

Answer 9

no risk execpt you tie up your money for x months and can't get it back without a penalty.

Answer 10

They might get scratched and then you can't play them any more.