Certificate of deposits are one of the safest investment vehicles available. They are assigned a fixed rate by the bank and are FDIC insured, meaning you won't lose your money. Although certificate of deposits (CD's) prevent you from accessing your money until the fund reaches its maturity, there are a number of advantages that make it a common investment. You can open a CD at a bank or credit union, and the more money you put into it, generally the more interest you earn and the less time you have to commit your money to the bank.
Liquidity
CD's lock up your money for a designated period of time, but that doesn't mean they have no value. If you need the money fast, you can sell the CD to an investor in the secondary market to regain your funds. Most CD's do not permit early withdrawals, but your bank may let you retrieve the money early minus any interest earned, and you can usually access the money in the event of an emergency, disability or death.
Low Minimum Investment and Time Commitment
CD's are available at all kinds of price brackets, including those exceeding $100,000. But you can also find certificate of deposit options for as low as $500, depending on your bank. The time commitments required with CD's also tend to decrease as the amount of money you invest goes up and can be as long as one year or as short as seven days.
Easy Roll-Over Option
When your CD reaches maturity, the initial investment plus interest is made available to you. You can withdraw this money or add the money back into a new CD, including your new interest earned, and have the bank automatically roll these funds into a new account without wasting any time. This maximizes your earning from CD's over a long period of time.
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