Why choose to invest in a CD over another form of investment such as stocks or bonds?

There are lots of good reasons to choose CDs as an investment tool, especially for college students who often don’t have a lot of disposable income or money to play around with. Here are some of the benefits…

1) They’re low-risk. Why take much of a chance when you know you can get a solid return?

2) They can have relatively short maturity terms; anywhere from three months to a few years is typical. If your money is going to be sitting in a savings account, why not earn 4-5% instead of the 1-2%, which is typical for a savings account?

3) Return of your full principal amount invested is guaranteed.

Have you heard of people getting burned by a stock investment due to poor timing, a faulty tip or just plain bad luck? You will avoid the worry and the risk by opting to put your money in a secure CD instead. All funds invested in a CD are insured up to $100,000 by the FDIC, meaning that your money is guaranteed to you regardless of the circumstances (unless of course, you have invested over $100,000). This insurance protects your principal invested, but doesn’t promise a particular rate of return.

Remember, there are benefits to investing in all of these options: stocks, bonds, and CDs along with other choices such as mutual funds and money markets. The best investment mix for you depends on how much money you have available to invest, how long you want to have your money tied up, and how much risk you’re willing to take.

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