29

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 portfolio has no such guarantee and can lose money. Your potential upside is theoretically correlated to the risk that some or all of your money may not be ...


28

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 savings in CDs because I'm not planning to touch it and it yields a little better than a vanilla savings account. To address the comment about liquidity. In ...


19

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 the short term. Do you want both... Or neither? When are you going to use the money? If it's IRA money you can't touch for 30 years, it really ought to be ...


19

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 market might give you more money or less. More is obviously OK. Less is not if you're planning to pay basic expenses with it, e.g. food, rent, etc. Most ...


15

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 their money. At this point, they likely have more money than they need for the rest of their lives, even if it doesn't grow. It sounds like your parents are ...


14

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 forfeit some of the interest. You also generally can't move a portion of the money out of the CD, you have to pull it all out, and then start a new CD with the ...


11

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 bear risk. You will not find truly risk-free investments that earn more than the types of investments you have been looking at...most likely you will not keep ...


11

Because rates might be lower before the 9-month period is over. If you don't think that's likely, that's fine.


8

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 other people need to liquidate their investments, and such correlation will push down the immediate value of those investments. While certificates of deposit ...


8

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, but it is theoretically possible. If you pay attention, if this happens, you could simply moving it to a CD then (if it is still offered). People with little ...


8

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 want to spend some time doing a credit check on the bank, but since most of us retail depositors have neither the resources or the education to evaluate the ...


8

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 this writing) a 0.02% APY on most 12-month or shorter CDs, and a 0.01% APY on savings accounts. These are simply not competitive rates. Ally offers CDs ...


7

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 guidelines. You can get allocation advice for free by signing up for http://www.personalcapital.com or http://www.futureadvisor.com Those services won't ...


6

Short answer: the CD can be considered as part of the down payment calculations. they will want a plan to cash them in the last days or weeks before settlement. When approving you for a mortgage they will be looking at: Income : Generally salary or from a guaranteed stream like a pension or social security. Commission based income is a special case. But ...


6

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 33 purchased CDs were able to be liquidated for cash. Supposition without evidence would be that Tucci-Jarraf contacts the bank manager, and says something ...


6

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 derivatives to choose from, as well as bespoke structured products.


5

Savings accounts may have higher yields since the financial institution is trying to attract more deposits. Additionally, what fees exist on a savings account that wouldn't likely be the case for a CD? If a bank with a savings account is charging $5/month as a maintenance fee, are you properly factoring that into the overall yield? Another factor here is ...


5

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 bank savings accounts, where you can make a withdrawal instantly, are not time deposit accounts, by definition. However, some banks offer a product called notice ...


5

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 significant income, but they have proved to provide significant capital gain. With conservative calculations, in a 5-7 year time span, you can double your money. ...


4

If the wording is "within 10 days" then its 10 days. Calendar days. Otherwise they would put "10 business days", for example. Usually, if you need to do something within 10 days from today, the first day to count is today. I would expect "within" to mean that you can fund in any of the days up to the 10th. But that's me, trying to read English as English. ...


4

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 software. The term, length, and difference between opening date and maturity date should all be equal. When exactly does this CD actually mature from the owner'...


4

The benefit, as other answers have mentioned, is higher interest rates than are available compared to other comparable options. My bank keeps spamming me with offers for a sub 1% APR savings account that only requires a $10,000 balance, for example. While CDs and similar safe investments don't seem like they offer much value now (or in the recent past), ...


4

In all four cases, the APY (Annual Percentage Yield) tells you exactly how much interest you can expect over the year, meaning that it takes compounding into effect. In essence, the interest rate for each period (3-month, 6-month) is back-calculated such that the actual yield for a year is the APY. So if rates do not change, and you start with $100,000, ...


4

Buying property and renting it out is high risk. It only takes one tenant who doesn't pay the rent, then wrecks the place before leaving, to wipe out any income you were hoping to receive. A standard market tracking equity fund is one of the most popular options if you want better returns than cash. But it isn't risk free. If the stock market goes down, ...


4

In this case there is no reason to purchase the shorter term CD. I suspect the product choices exist because: Some people may not realize this and choose the lower rate products. The bank makes a little extra profit when this happens. Offering a choice enables astute people to be excited with choosing the highest rate and perhaps like the product slightly ...


3

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, and must manage that risk by diversifying your portfolio of investments. Unfortunately, answers to this question will be somewhat opinion and experience-based. ...


3

With a "normal" CD you can't, but some banks do seem to offer CDs where you can. For instance the "variable-rate CD" at USAA allows ongoing deposits. I also found a United Bank "saver CD" which requires you to set up automatic monthly deposits. You would have to check each individual bank's CD offerings to see if they have such a product. However, if you ...


3

While you can't generally add money to a CD, you can simply buy additional CD's. For example, I keep a portion of my emergency fund in CDs, every couple months I buy/open a 5-year CD, I haven't been doing this long enough for any to have matured, but depending on rates in the future when they start maturing I'd just used the proceeds to buy another at that ...


3

Buying CD's are profitable, yes there are pros and cons of buying a CD. When you buy a CD, you promise to invest a fixed amount of money in a bank for a set amount of tenure. Your money is insured by the FDIC so there's security there. CD's steady interest rates offer fixed rates for fixed terms. However, you can even go for Money market funds and Fixed ...


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