Home Banking Advantages of Buying Certificates of Deposits

Advantages of Buying Certificates of Deposits


There are many reasons that the advantages of certificates of deposits are compelling. In today’s market and economic situation, those reasons only get better. The advantages of a CD are many and long gone are the days when only farmers wanting to stash their money until they purchase their spring seeds utilized the certificate of deposit advantages.

Today’s financial markets have two types of investors: the instant gratification junkies and the long term investors. The instant gratification types have little interest in anything other than very short term certificates of deposit and often use them merely as a way to store money while they wait out a maturity on something else.

For the serious, longer-term thinker, however, the advantages of a CD are immense. Since certificates offer a fixed interest rate for a set time period, they make it easy to plan ahead and give a virtual guarantee of payoff. Unless the bank fails, the money will be there (with interest). Even with bank failures, your initial deposit won’t be lost thanks to FDIC insurance.

Rates on savings and other variable interest are constantly in turmoil: changing regularly, going up and down without warning. One of the biggest certificate of deposit advantages is that lack of turmoil and change. For a 5-year CD term, for instance, you are guaranteed that interest rate over that five years, no matter what the market’s doing.

Currently, another of the advantages of certificates of deposits are those same interest numbers. High yield accounts such as money market savings accounts are not competing well with CDs. For the person who thinks in terms of 1, 3, and 5 years ahead, only the advantages of a CD can deliver real and stable returns.

Many IRA, mutual fund, and other investors will utilize the stability of certificate of deposit advantages as a base line for their portfolios.

So consider the advantages of certificates of deposits when you look towards your next long-term financial goal, be it 6 months or 6 years from now.