Wednesday, October 2, 2013

Are Certificates Of Deposit Any Good?

How good is a CD?

Let's consider 2006 back when I had some of my money in a CD the rates were at 4.4% APY.  In 2007 I locked another CD for 5.15%.  It was a good return with very little risk the only risk was that during the same time the Dow Jones was delivering higher profits. Come 2008 a risk free CD looked even better as I was not keeping my money in stocks just yet.  Had I known the stock market drop in 2008 would be so severe I would have locked my 2007 rates for several years enjoying a 5% yield in a near zero interest rate economy which has been the norm for several years now.  CD rates dropped drastically in 2008 in 2010 you were lucky to get .648% for an 8 month CD. In April of 2013 you would have gotten .349% for a 180 day personal CD.  When owning a CD you also have to take into account the taxes you will pay on the yield which will bring down your profit a bit.

As we can see you have to be strategic when it comes to placing your money in a CD even if a CD is about as safe as you can get.

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