June 1, 2007, Newsletter Issue #69: CD Investing
Tip of the Week
Invest in a Certificate of Deposit (CD) when you have money that you anticipate using in the near future, but not immediately. CDs are available for periods as short as 3 months and as long as 10 years, and require at least $500 to open. They always pay a better interest rate than a savings or checking account, but you'll be charged early withdrawal fees if you want access to your money before the term of the CD is up. In general, the longer term you choose for your CD, the better interest rate you'll get. However, there are disadvantages to choosing the longest term CD available. Besides not having access to your money until the term is up, you could lose out on better interest rates available in the near future. If you invest in a 5 year CD and interest rates jump three percentage points during that time, you won't be able to move your money to a higher paying CD until the term is up.
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