The first step to smart investing with a CD (certificate of deposit) account is understanding what it is and why it is a smart choice. A CD is a type of savings account that typically requires at least $500 to open. When you deposit this money into your CD you agree to not touch it for a specific amount of time, this is known as the term of the CD. However, in exchange for not touching this money you receive a higher interest rate. This means no matter what the economy does you will receive a return on your CD investment.
However, as with any investment you make you need to know tips and tricks of the pros to ensure that you invest smartly.
Tip: Do not withdraw any money prior to the established date. If you do this you may forfeit part of your interest. When the CD reaches term you are given back your entire premium, along with all of the interest that was accumulated.
Tip: It is smart to go through a broker to invest in a CD. In many cases a broker will purchase these in mass amounts equaling huge savings, which they will pass on to you.
Tip: Always ensure that you are going to be federally protected with any new CD investment you make. Keep in mind, you are only insured up to $100,000 per every lender, therefore if you have more than this from one specific lender you will not be insured.
Tip: Always remember that cashing in your CD early will require you to lose some of the interest that it has built.
Tip: If your lender opts to call in your CD it means that you will receive the principle amount you invested along with any interest, prior to the term date. This often occurs if a lender notices the interest rates are dropping. In cases such as this you will need to find somewhere else to invest.
Tip: Always do your research. There are several different types of variables when it comes to CDs. Understanding what you are getting into is essential to investing smartly. If you have any questions you should seek the help of a professional broker who deals with investing on a daily basis.
Investing in a CD can be an extremely smart move. However, you should always ensure you are making the best investment selection for your specific needs. Using these tips will help you utilize smart CD investing tips.