Certificates of Deposit (CD) ensure that you get a high
return for a low risk investment you make. However, like some deals that may
seem “too good to be true” you’ll need to watch out for complex and risky CD
deals. Here are a few things you should note.
1.
How CDs Work
Certificates of Deposit are deposit accounts you open and
deposit in with banks or thrift institutions that have a higher interest rate
than regular savings accounts. CDs, like all bank accounts, are FDIC insured.
You’ll invest a fixed sum of money for a fixed period of time that could go
from six months to decades. It pays out once it reaches maturity and you earn
the interest of the profit with your deposit.
2.
Financial Goals
Take a great look at your financial situation and ensure
that you have a definite financial plan. Always assess the risk and know the
call features of your CD. A small detail often forgotten by investors is how
they will get paid and the processes needed once the CD matures.
3.
Brokered CDs
When you purchase CDs from a legitimate broker, the entire
process may become more complex and you could put yourself at a great risk than
investing directly with banks. A brokered CD could have you lose some of your
principal if you withdraw early as a penalty. Always check their background,
know your issuer and ask about your deposit broker’s record keeping.
