Investing Information

Looking for a safe investment? try a certificate of deposit - investing


If you are looking for a safe investment and you have connecting $100 -$1,000 to invest, you ought to be concerned about a certificate of deposit or CD. When purchased because of a bank, CD's are federally insured up to $100,000.

When you invest in a certificate of deposit, you are lending your money to the bank for a set dot of time at a fixed rate of interest. At the end of that time period, the bank pays you back your investment with the activity you've earned. The twelve-monthly appeal earned is reflected by the twelve-monthly percentage yield or APY.

There are more than a few fine points to be concerned about beforehand investing in a CD. First, find out when the CD will mature? Banks offer certificates of deposit with maturities ranging from 3-months to 10-years or more. Amount out how much to all right invest and how long you feel you can leave that money alone so that it earns interest. Also, make sure you get the adulthood date in writing.

Second, you'll want to know the once a year percentage rate (APR) you'll earn on your investment. Investing better sums for longer terms customarily earns the best interest. However, even a small investment can earn you privileged appeal than a customary passbook savings account.

Next, find out how the appeal is compounded - daily, monthly, or annually? Daily compounding is best for the reason that it earns you more interest. You can shop for the best CD rates at www. bankrate. com or check with your own banker.

Shopping on the internet, I found rates for a $1,000 1-year CD in my local area ranging from 2. 96 to 3. 97 APR and a 3. 00 to 4. 05 APY respectively. So if I invested $1,000 at 2. 96 APR, at the end of 12 months I'd get paid $1,030. 00 by the bank (figures computed with appeal compounded monthly). That same $1,000 invested at a rate of 3. 97 APR would come back $1040. 43.

Interest rates are by and large safe in for the term of the CD, though some banks allow you to take improvement of elevated advantage rates by converting your CD. This type of CD is called a "step up" CD. Generally, banks will only let you "step up" once at some stage in the term of the CD.

What happens if you leave your money beforehand the certificate of deposit matures? Your bank will be in the way an early withdrawal penalty, which can vary depending upon the experience date and the quantity invested. It's crucial to invest only money you can truly give to leave alone for the term of the CD.

As with any investment, make sure you appreciate all the terms, fees, and any penalties beforehand you purchase.

Copyright 2005, http://www. yourfreecreditreportnow. com
Author: James H. Dimmitt

James is editor of "TO YOUR CREDIT", a free weekly newsletter with tips to help you administer your own finances. Subscribe today and be given his e-book "IDENTITY THEFT- How To Avoid Attractive the Next Victim!" and other money-saving bonuses by visiting http://www. yourfreecreditreportnow. com


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