The safety of money in banks has been imposing a huge question mark of late, citing the Lehman brothers’ fallout. Post the economic mishap (that left many jobless and burnt much more numbers of pockets!), not just the US but the economies throughout the world faced the music and is now in the recuperating mode. All the recent happenings has just left the average man asking-‘Is my money safe in banks?’ Or a more refined question would come across as – “Where will my money be safe?”

A CD or certificate deposit comes as the answer for being the safest of the various options. Yes, CD is something that can still be considered as something safe (read relatively safe) even though CD’s too are closely related to banks. Firstly, the primary nature of a certificate deposit happens, to be of a virtually risk-free one, given in the insurance cover offered for the deposit. Earlier on, CD’s were looked down at times for not giving great returns, but post financial crisis one has to accept that a steady (a bit less though) return of a certificate deposit is much safer than playing around with the fluctuating economies of the share market.

The prices of shares have been kissing the grounds for a while now. Even the interest rates of savings bank accounts are plummeting. In such a scenario, the certificate of deposits still in term with a reasonable and steady interest rate is turning out to be profitable! Yes, the interest rates of CD’s too are dwindling, but at the end of the day it’s all worth the surety and safety that comes along with CD’s.

CD’s should be the place for your hard earnings, if you wish to have a secure future. Even if one cannot resist investing, saving a part of one’s income in CD’s will always be better. It isn’t that CD’s are completely immune to the economic bangs! It’s just that CD’s are on a relatively safer side and as the saying goes- it’s always better to be on the safer side.

Popularity: 1% [?]

If you have been investing in the stock market or various bonds in the past years then the current financial crisis must have affected you to a great extent. In fact it is the same with many others who were against investing with the banks especially in the Certificate of Deposits. It seemed to be really boring that the money will fetch you interest of only 2-5% in the due course of time wherein in the same time frame the share market can double the amount. But the scenario has changed drastically in the past few days. The stock prices have dropped down significantly and now the investors have nothing to do but wait for a good time to come. In order to avail this opportunity the banks are raising the interest rates on CDs and people are trying to reap the benefits as much as they can.

So CD investment has become a mutually beneficial affair for the banks as well as the consumers. There are quite a few reasons behind the banks hiking the interest rate noticeably compared to the 2% rate by federal banks. The 1 year CDs are offering 3.5% rates on an average and the 5 year ones offer round about 4.2%. Expecting the federal CD rates to be hiked by the year 2009 the banks have already increased it. This is in fact a really good way to acquire customers. Now if you look at it from a customer’s point of view, the CDs seem to offer highest level of security to them. The traditional CDs offer you a fixed interest rate through out the period you choose to continue with the investment. This happens to be the most popular option among the many other CD schemes available now-a-days.

As an investor you should always look after the security of your money rather than the higher yields. In due course of time many people have realized that CDs make the safest mode of investment compared to others like stock market and they come with assured succumb in limited time.

Popularity: 2% [?]

First things first- what’s certificate of deposit and what’s opportunity cost? Certificate of deposit is a financial product offering a timed deposit. Opportunity cost is one of the fundamentals of investing. It’s nothing but the price one pays for missing out on various opportunities due to the money being already invested. Investing on a single thing i.e. investing more on a single thing (that you believe will give high margin returns) is a smart move, but not always as investing the entirety on a single thing comes with a cost of losing out an opportunity or several opportunities for which the money could has been used. One such use may even be investing in something that is bound to fetch better returns!

Now, how’s certificate of deposit related to opportunity of cost? As obvious as it is, certificate of deposit implies the deposit being untouched for an agreed period of time and that’s a catch sometimes. Certificate of deposits or CD’s are undoubtedly one of the safest ways to make money and accrue one’s savings. But, it has a tendency to clinch away opportunities. Many of the CD holders may nod their heads in agreement to the fact. Consider a situation wherein the interest rates have just doubled than what it was when you had deposited! You may lose out the piece of cake straight away. The case may be the exact opposite if the downside of interest rates occurs (like it recently did in many of the banks worldwide- banks of US, Taiwan etc), but one has to accept the fact that CD’s do have a natural tendency of cutting down opportunities.

So, the CD’s are the safest bet for savings and they are a blockade of opportunities too. How do we go about with it then? Well, regulation comes in handy here. The term for which the deposit is done needs to be selected wisely. A longer term may fetch a slightly more interest rate, but one need to question is that actually worth the time? Many banks offer various terms for CD’s and many of the online banks have recently launched more flexible options for the terms.

Popularity: 2% [?]