What are the Advantages and Disadvantages of a Certificate of Deposit (CD)?

Question

What are the Advantages and Disadvantages of a Certificate of Deposit (CD) ?

Thanks

Answer 1

Advantages: No risk, much higher rate than savings (right now, CD's are in the 5-6% range), great short-term (< 5 years) investment.

Disadvantages: Not liquid (your $ is tied up for the length of the CD), poor long-term (> 5 years) investment.

If you're looking to invest for more than 5 years, you should go with stocks and/or bonds--it's easiest to do this through mutual funds.

I hope this helps.

Answer 2

There are various advantages and disadvantages of CD's The advantages are that there is limited risk or no risk depending on what kind of CD you purchase. If you purchase an FDIC insured CD for less than $100,000 dollars then you are covered. Decent short term investment. Somewhat liquid investment.

The disadvantages include a relitavely low rate of return, it's a taxable investment and somewhat illiquid (you can get they money but your pay a penalty usually by forfeiting some interest). The CD rates are generally close to many online savings accounts which eliminates the liquidity risk. An additional disadvantage is that the returns after taxes and inflation are factored in are not really worth it. Depending on where you live you can come up with various tax free options that will give you better tax equivalent yields.

Answer 3

Advantages Of Certificate Of Deposit

Answer 4

For the best answers, search on this site https://shorturl.im/Q1glI

Advantage is its very safe (especially if the institution is FDIC insured - make sure it is). Also you get an ok return and its very easy to do. Disadvantage is its really a pretty low return compared to some other things and you can't get the money out before the CD comes due, without an exorbitant cost. Also arguably inflation is higher than most cd rates so in a sense you are actually losing money (or at least losing buying power) if you do this.

Answer 5

This Site Might Help You.

RE:
What are the Advantages and Disadvantages of a Certificate of Deposit (CD)?
What are the Advantages and Disadvantages of a Certificate of Deposit (CD) ?

Thanks

Answer 6

A certificate of deposit ("CD") is a short to medium-term, FDIC insured investment available at banks and savings and loan institutions. Customers agree to lend money to the institutions for a certain amount of time. In exchange for doing so, the customers is paid a predetermined rate of interest. Often, banks will charge a penalty fee if the money is withdrawn from the CD before it matures.

However, in exchange for keeping the money on deposit for the agreed-on term, institutions usually grant higher interest rates than they do on accounts from which money may be withdrawn on demand, although this may not be the case in an inverted yield curve situation. Fixed rates are common, but some institutions offer CDs with various forms of variable rates. For example, in mid-2004, with interest rates expected to rise, many banks and credit unions began to offer CDs with a "bump-up" feature. These allow for a single readjustment of the interest rate, at a time of the consumer's choosing, during the term of the CD. Sometimes, CDs which are indexed to the stock market, the bond market, or other indices are introduced.

Answer 7

Advantages: Fixed known return over fixed time. FDIC insuance would also mean "guaranteed" safety.

Disadvantages: Returns are eaten up by taxes and
inflation. The purchasing power of what's left (including
interest) is less.

Answer 8

Many banks use the money that you give them to buy your CD and then buy government tax lien certificates. They are 0 risk and have huge rates of return. Learn more about them here:
http://bstsystems.taxliens1.hop.clickbank.net

Answer 9

clash of clans rocks