Certificates of Deposit
Investors searching for relatively low-risk investments that can easily be converted into cash often turn to certificates of deposit (CDs). A CD is a special type of deposit account that typically offers a higher rate of interest than a regular savings account. Unlike other investments, CDs feature federal deposit insurance up to $250,000 per category of legal ownership by the FDIC.
- When you purchase a CD, you invest a fixed sum of money for a fixed period of time – six months, one year, five years, etc. – and, in exchange, we pay you interest, typically at regular intervals.
- When you cash in or redeem your CD, you receive the money you originally invested plus any accrued interest.
- If you redeem your CD before it matures, you may have to pay an “early withdrawal” penalty or forfeit a portion of the interest earned.