Are CD’s The Right Investment For You?
In order to see if a CD is the correct way to invest for you:
Again, if you withdraw your money before the CD comes due, you will incur a substantial penalty. If you are at all uncertain regarding the length of time you can invest you might use a technique called laddering (more advanced).
- Determine when you will need all or part of your cash. Will you need to access this if times get tough? Can you safely leave the amount you plan to invest for the entire time you take out the CD?
- What do you think will happen to interest rates? If you think that rates are rising (which usually happens during inflation) invest in a short term CD. That way, if rates do rise, you can take advantage of the higher rates. On the other hand, if you think that rates are falling (usually when the economy is on a do wnswing), a longer-term CD is better. This way you lock in a fixed rate and if the rates are further reduced you will still be earning a higher rate. It is always important to look at investments in both the long and short term. Also, you need to be aware of the broader economic climate both in the U.S. and around the world.