Can someone give me examples of how a certificate of deposit works? I would like to do something with this money instead of letting it just sit in a checking account.
2007-05-18 09:29:17 · 7 answers · asked by shadowboxer78 2 in Business & Finance ➔ Investing
Don't know exactly what you mean by examples but I will try.
You invest 20K in a 6 month CD at 5%, your money is tied up for 6 months you cant touch it and at the end of the 6 months you will have $20500.
You invest 20K in a 12 month CD at 5.5%, in one year you will have $21100.
When you buy a CD you lose the ability to use the money, as long as you can risk that you won't need it in those 6 months then go for it.
2007-05-18 09:41:23 · answer #1 · answered by Joseph T 4 · 1⤊ 0⤋
A CD is a short term investment vehicle that almost any bank or savings institution can sell you. The biggest problem is that you lock up your money for the term of the CD which can vary from six months to five years. They will usually let you cash in the CD early but they will charge you a fee to do so. Which usually results in you not earning any interest on the investment. Interest rates on CD 's are not particularly high either.
A better option would be to put the money into a money market account. These generally pay a higher rate of interest than a CD and they allow you to withdraw some of the money by writing a check against the account. Check minimum amount is usually $500.00.
A mutual fund company can set you up in a money market account. Get recent issue of "Money" magazine, they have contact information for mutual fund companies.
2007-05-18 16:50:32 · answer #2 · answered by BD in NM 6 · 0⤊ 0⤋
The best thing about a CD is that it is insured by the bank, usually up to 100k. There is no chance that you will lose your initial investment like there is in the stock market, and you are guaranteed the quoted return. There is no fluctuation or guesswork to determine what your investment will yield. However, your money is tied up for the duration of the CD. You cannot withdraw your money until it has matured without penalty.
You could earn better returns elsewhere, but if you are looking for a relatively riskless investment with guaranteed returns, I would go with a CD.
2007-05-18 16:52:15 · answer #3 · answered by Ashley I 2 · 0⤊ 1⤋
first make some calls and see which bank offers the best rate. after you find the highest one they will give you options of usually 3, 6, 9 or 12 month CDS. the lower the duration in the bank will usually yeild the highest rate, however it may not always pay to have it in the lower. When investing be sure to ask what your yeild will be after the term is over. after that the Cd is in the bank fo rthe duration of the Cd and you cannot touch it until then.
2007-05-18 16:38:59 · answer #4 · answered by jefferson 5 · 0⤊ 0⤋
If you really want to invest the entire $20,000 in CD's, I suggest you "ladder" them. Put some in of each of these, for example:
3 month CD
6 Month CD
9 month CD
12 month CD
18 month CD
2007-05-18 17:44:49 · answer #5 · answered by ? 6 · 1⤊ 0⤋
I won't suggest you put it on CD, For CD account, you cannot touch it before it matures, if you do, you will get penality.
It is more wise if you put your money in mutual fund account.
You can diversify your investment, put 10,000 in equity, 5,000 in CD accoung and 5000 in Bond.
2007-05-18 16:37:35 · answer #6 · answered by YourDreamDoc 7 · 0⤊ 1⤋
You may also want to check into treasury bills.
http://www.treasurydirect.gov
2007-05-18 16:37:18 · answer #7 · answered by Anonymous · 0⤊ 0⤋