CD Checking for Best Rates

By: EconomyWatch Content Team   Date: 9 March 2010

About The Author

EconomyWatch Content Team

The Economy Watch Content Team manages our thousands of reference pages on economic, industry,

EconomyWatch, Content Team

 

  • Dot Div
  •      

Today’s world of investment is different from three years ago, which means that to make money, you need to think outside the box and consider ALL options.  Certificates of deposit are excellent investments in that they are low risk, you would have flexibility regarding the dollar amount to invest and the defined term, and if you spend time, CD checking for best rates would yield the highest return on your investment.

Seasoned investors understand the value of one factor associated with certificates of deposit – compounded interest.  This means as you start CD checking for the highest interest rate offered, you also want to determine how often interest is compounded.  The more frequent the compound the more you can make.

For instance, if interest were only compounded quarterly, it would take a long time to get a return on your investment but if you were CD checking for rates and found a bank that offers monthly compounding, you know immediately that the opportunity for making more money exists.  Therefore, along with interest being a determining factor in choosing a bank and type of CD, you want to pay attention to how often is compounded too.

Another important consideration as you begin the process of CD checking for rates and compounded interest is whether the rates outweigh the amount of the investment.  Going back to gurus of the financial world, many live by what is known as “Rule 72”.  For this, the number 72 would be divided by the interest rate being offered.  The result would be the number of years it would take for your initial investment amount to double.

Let us say you were CD checking and found a bank paying 2% and you wanted to invest $5,000.  Taking 72 and dividing it by 2 means as long as interest rates do not fall, it would take 36 years for the $5,000 to become $10,000.  Obviously, certificate of deposits are not intended for that length of time but as one CD reaches a term of maturity, the money plus accrued interest could be rolled into a new CD, and so on.

By investing this way, you would actually more than double your initial investment.  Obviously, the greater the interest rate that you can find while CD checking the quicker your money would double.  Using the same scenario but with an interest rate of 5%, you would earn a minimum of $10,000 in just over 14 years!  This is why major investors, those depositing $100,000 and more want to lock the money in for a long time.

Today, banks are scrambling to find different sources of new deposits.  As you go through the process of CD checking, you will quickly discover that a variety of certificate of deposit types exist, as well as competitive interest rates and terms.  For this reason, the more time you can spend CD checking the better chance you have in finding a solid investment.  Yes, there are short-term CD investments too but if you want to make the most from your money, perhaps for retirement, then this is the course to take.
 


  • Dot Div
  •      

Most Popular in CD Certificate Of Deposit

Related Links
blog comments powered by Disqus