4 Reasons to Use CDs for Investing

Most people prefer to reduce risk as they get closer to their retirement goal, and Certificates of Deposit (CDs) for investing can help them accomplish that. Using CDs for investing offers a combination of access, liquidity, safety and growth potential. This makes them an ideal choice for those looking to reduce risk in their portfolios:

Access

You can purchase CDs in a variety of maturities, making it easy to access funds when you need them. However, there are penalties for early withdrawal, so you’ll want to plan your timing to match your specific needs.

Liquidity

CDs offer a greater variety of short-term investment horizons. This makes them an excellent choice for anyone seeking both security and liquidity.

Safety

CDs can be an ideal foil to the volatility of higher-risk assets such as stocks. Prices of bonds and bond mutual funds can also vary considerably since they react to changes in market interest rates. With a CD, however, you can lock in a rate and not worry about losing your principal. CDs are generally FDIC-insured up to the maximum allowed by law.

Growth potential

If you need a dependable return on your money, but don’t need your money for a period of time, choosing CDs for investing can be an excellent choice. You can also make your savings work harder for you by “CD laddering” – opening multiple CDs with different maturity dates. This allows you to take advantage of the best CD rates for longer terms while ensuring liquidity and flexibility since one or more CDs will always be approaching maturity.

AAA members receive preferred member rates on 12, 24 and 60 month CD and IRA CD terms through AAA’s program with Discover Bank. Open an account online in minutes, or call the 24-hour, U.S.-based customer service line at 888-728-3230.

Deposit Accounts offered through Discover Bank, Member FDIC. The article and information provided herein are for informational purposes only and are not intended as a substitute for professional advice.

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