How CDs Can Generate Additional Income In A Fiscal Crisis

People who invest in high-risk investments do not generally do well in an economic downturn. Aggressive portfolios do have a time and a place. They are a gamble that sometimes allow the stockholder to do exceedingly well. However, if stockholders do not diversify their investments, the said stockholders are likely to lose much of the time and money that they invested. Conservative investments such as certificates of deposit (CDs), generate income at a steady, predictable rate.

In the field of investing, what is unpredictable usually garners a high return. Wall Street power brokers, business tycoons, and high-level executives may have sports cars and timeshares, but if they do not have access to liquid capital, all of their assets are useless in the event of a market crash. Markets always fluctuate and can sometimes crash. Because investments like CDs are reliable, they tend to have a lower, but steady, return. The interest rate may be anywhere from .25% and 5% annual percentage yield (APY), but it can offer a measure of security for those who invest in them. After all, they are currently insured up to $250,000 by the FDIC for a bank or NCUA for a credit union. Because the bank or credit union depends on the availability of the funds, one can expect fees as a penalty for withdrawing CDs early.

A CD is a good choice for those who have difficulty saving money or for people who spend frequently, because CDs generally have requirements for mandatory deposit term lengths. Choices often range from between six months up to five years. After ten years, the account is generally considered a retirement account.

CDs generate income that can help with emergency expenses. It is generally recommended that individuals and families have six months’ worth of salary available in an emergency fund if some unforeseen expense occurs. Since these assets are always available, albeit with a penalty for withdrawing the funds early, they make a good cushion in an emergency situation.

Another use for a CD could be for a planned expense like a vacation or tuition for an educational institution. The money will be there, accruing interest, when the investor needs it. It can be given as a gift or utilized for financing home improvements, or any other situation imaginable. Perhaps the CD could be used to pay off debt, purchase a special gift, or cover some expense that was not budgeted, such as unexpected car repairs. CDs are excellent steadfast choices for enhancing an individual investment portfolio. Although people do not usually “get rich quick” with CDs, CDs do generate helpful income at an expected rate and make a dependable option for investors.

This entry was posted in Financial Tips and tagged , . Bookmark the permalink.

Comments are closed.

Find High Yield Online Savings Accounts from Banks You Can Trust

Savings account interest rates updated daily.