31
votes
Accepted
Is there any advantage to a longer term CD that has a lower interest rate than a shorter term CD?
Taking a longer-term CD with a lower interest rate could make sense if you expect CD interest rates to drop in the near future. Suppose you could get a 6-month CD with a 5.1% interest rate, or a 12-...
- 4,596
30
votes
Are Certificates of Deposit worth it compared to investing in the stock market?
The difference is downside risk.
Your CD, assuming you are in the US and the CD is purchased from a deposit bank, will be FDIC insured, your $10,000 is definitely coming back to you. Your stock ...
- 49k
28
votes
Accepted
What's the benefit of opening a Certificate of Deposit (CD) Account?
If you've already got emergency savings sufficient for your needs, I agree that you'd be better served by sending that $500 to your student loan(s).
I, personally, house the bulk of my emergency ...
- 49k
26
votes
Accepted
What is the best way to loan money to a family member until CD matures?
I will first look at your three scenarios:
I could gift her $37,000 and ask her to pay it back later. But that
exceeds gift limits and also seems “wrong” as it isn’t a gift.
The lender will notice ...
- 136k
23
votes
$1.44 million in holdings: Help my non-retired, 80-year-old dad invest it
This is not the answer you were hoping for.
I recommend that you stay out of it and let your parents do what they want with their money.
They are obviously very good savers and very thrifty with ...
- 115k
19
votes
Are Certificates of Deposit worth it compared to investing in the stock market?
Growth and volatility are a matched set.
Growth is how well the investment will grow on average. In the long term, this is a sure thing.
Volatility is how much the value will jerk up and down in ...
19
votes
Are Certificates of Deposit worth it compared to investing in the stock market?
Reliability
A CD is guaranteed to pay its return on maturation. So if you need a certain amount of money at a specific time in the future, the CD is a more reliable way of getting it. The stock ...
- 21k
19
votes
Should I pay off mortgage or invest in CD?
Assume I have $50,000 loan that I could pay off (2.875 rate) which I
could invest in CD with 5.5 rate for 12 months, could anyone please
tell me what would be the correct calculations? Thanks!
...
- 69.1k
15
votes
Accepted
Are there risks or hidden costs of buying a CD from a bank I don't have an account with?
One issue with a CD is that it is all or nothing. If you need it early there may be a penalty. If you only need 75% of it you have to cash it all in and then buy another CD or move the rest someplace ...
- 136k
14
votes
What's the benefit of opening a Certificate of Deposit (CD) Account?
One reason why you can get a better rate with a CD compared to a regular savings account is that they lock you into that account for the period of the CD. You can get out of the CD early, but you will ...
- 136k
12
votes
What's a good option for passive income for a college student?
There's no such thing as true "passive income." You are being paid the risk free rate to delay consumption (i.e., the super low rate you are getting on savings accounts and CDs) and a higher rate to ...
- 15.1k
11
votes
Why would I open a low-rate 9 month CD instead of a higher rate savings account?
Because rates might be lower before the 9-month period is over. If you don't think that's likely, that's fine.
- 49k
9
votes
Accepted
When one bank's CD yields are one hundred times the market
Why are CD yields as low as savings account rates?
This is presuming that you are in the US, and you are looking at the CDs offered by very large banks such as Chase.
Chase currently offers (as of ...
- 5,097
8
votes
Accepted
What is the purpose of a short term CD that offers lower interest than a savings account?
Very little, as you expected.
The CD locks the rate in, meaning you get the rate for sure. The savings account can change any day, so it could fall below the CD's rate.
Chances are small, obviously, ...
- 37.6k
8
votes
Accepted
Do banks do a credit check when buying a CD?
No. When you are getting a loan the bank is extending you credit, and they will want to check on your credit worthiness. When you buy a CD you are extending the bank credit! As a creditor you might ...
- 12.5k
8
votes
Accepted
Are Certificates of Deposit worth it compared to investing in the stock market?
Another factor to consider, beyond the fact that growth and volatility go together, is that the times when many people will need to liquidate their investments will correlate with the times that many ...
- 818
8
votes
Accepted
What factors to evaluate in a bank or credit union when investing certificate of deposits in the US?
How do I evaluate a bank or credit union for its financial strength
and trustworthiness before investing in their certificate of deposits?
This is a Unites States based answer.
Step 1: verify that ...
- 136k
8
votes
Should I pay off mortgage or invest in CD?
I think you have a decided advantage with the limited duration of 12 months on the CD. The difference between the rates is minor, but not insignificant, especially when you consider the return on ...
- 874
7
votes
Dad (mid 50s) wants me to help him invest ~500k?
You are asking about how to allocate money. We can't give you an optimal solution to that problem because no one really knows the necessary parameters to solve it. The best you can do are some general ...
- 15.1k
7
votes
Are there risks or hidden costs of buying a CD from a bank I don't have an account with?
One year treasuries and CDs are currently paying in the vicinity of of 4.75%. Both are guaranteed, the former by the US goverment and the latter by FDIC insurance. Ladder them if you think that you ...
- 75.7k
6
votes
Accepted
How does this example of fake certificate of deposit fraud work?
This article says the indictment claims that Tucci-Jarraf posed as Beane's lawyer in order to make the money available for the motor home purchase.
This write up indicates that only 1 or 2 of the ...
- 5,097
6
votes
Accepted
Does an equivalent to stock "options" exist for CDs?
I doubt it, since CDs are FDIC insured and mainly target retail savers/investors.
More sophisticated investors have bond options, interest rate options, caps/floors, and other interest rate ...
- 8,468
6
votes
What is the point of buying real estate when a GIC yields more?
You don’t usually buy real estate in cash. In Canada, you only pay in 20% of the property value. So you get a 5x leverage on a very safe investment.
Rental properties in Toronto don’t provide any ...
- 161
6
votes
Accepted
Will I lose any Principal if I cash in a CD early?
In theory, it would depend on the institution. You'd need to see what your institution's policies were.
In practice, I've never seen an early withdrawal penalty that was anything other than some ...
- 26.5k
6
votes
Should I pay off mortgage or invest in CD?
I actually made a google sheet comparing basically what you are talking about a while ago.
The sheet isn't perfect and there are some missing variables but you can sort of see what math is involved in ...
- 394
5
votes
What exactly is a time deposit?
Investopedia's definition is a little more inclusive. The idea is that a time deposit account is one where you need to wait for a certain period of time before you can make a withdrawal.
Standard ...
- 115k
5
votes
Does it make sense to ladder CD's if the APY is the same for different periods?
Another reason to invest in longer term CDs is to hedge against rates going down in the future. There might not be much difference in a 3 year and a 4 year in terms of rate but in 3 years that CD ...
- 2,113
5
votes
Is there any advantage to a longer term CD that has a lower interest rate than a shorter term CD?
Note that many high-rate short term CDs are promotional offers, not renewable at that rate, and only available if you deposit "new money" (from another bank) to open them. The goal is to ...
- 42.9k
4
votes
Accepted
What's a good option for passive income for a college student?
As mentioned in the other answer, you can't invest all of your money in one slightly risky place, and to receive a significant return on your investment, you must take on a reasonable amount of risk, ...
- 2,735
4
votes
Accepted
How can a "5 year CD" have a Term of "120 Months"?
Is this normal? Or is this some kind of typo/error? Why call it a 5 Year CD, if its term is actually 120 Months?
I believe that this is the result of an error in your bank's statement-generation ...
- 6,849
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