Laddering CDs is a good method of avoiding investing all of your money into Certificates of Deposits at a single low rate of return. Another advantage you get is that you will not have to wait more than a year to get back your money if you use a laddering CD portfolio. It works by buying different duration CDs and each year counts as a step up the investment ladder and when your one-year investment matures you can reinvest the money into a longer duration CD such as a five-year CD. In this way, you get more liquidity as well as a more secure means of making income.
However, in your search for highest CD rates, it need not necessarily mean choosing a bank of good repute because even a good banker will tell you to try out CD laddering which is a good way of breaking up one large deposit into several smaller ones that can be invested in periods ranging from one, two as well as three and even four and five years.
When you think about CD laddering, you will no doubt wonder about being able to match cash budget with maturities. It is thus important to think of five year ladder to get the best laddering CD rates, though it is up to you to decide whether to invest in as long as five years or go in for shorter periods.
It is also up to you as an investor to maintain your ladder of investments and not think that the financial institution will do this for you. It is important to remember that CD laddering should be used on time deposits with similar terms to get best rates of return. You will also have flexibility in choosing the time duration for your CD investments and you can rest assured that the laddering CD rates will definitely be higher than for your savings account. So, you may well think of using CD laddering the next time you are investing and want better returns as well.
Investors interested in getting the highest cd rates should consider investing in CDs that contain considerably long terms. When it comes to CD accounts, the longer the CD is for in terms of time, the higher the interest rate is. For example, a six-month term on a CD account may yield a 3 percent interest rate while a CD account that is for 60 months may have an interest rate that offers 3.73 percent interest on the initial CD deposit.
Jumbo Certificate of Deposit Accounts
Regular CD accounts have lower interest rates than Jumbo CD accounts; this is because the standard CD accounts are insured by the FDIC, whereas Jumbo CD accounts are a bit riskier. Jumbo CDs can yield interest rates that are as much as 2 percent higher than those offered with a regular CD account, but the initial deposit is not insured. The reason the principal is not covered is because a Jumbo CD is only started if the deposit is 100,000 or more. Thus, for the average individual, a Jumbo CD account may not be practical and many businesses, corporations, and organizations invest in Jumbo CD accounts.
CD Account Penalties
For those individuals looking to get the best CD interest rates, it must be noted that the sooner money is withdrawn the less interest on will receive. In fact, if the CD account is subjected to an early withdrawal the investor is apt to lose some of the interest accrue via the penalties imposed. In an effort to make the most on CDs and to get the highest CD rates possible, not only should the CD be allowed to reach maturity before withdrawal, but also the investor should not opt to take withdrawals on the interest if allowed to do so. Finally, it is beneficial if the investor research different banks and the rates they offer-different terms and interest rates can be located and the investor can compare and select the highest CD rates available.
Some investors are completely familiar with regular certificate of deposit accounts but have never heard of jumbo CD accounts. Jumbo CD accounts are very similar to standard certificate of deposit accounts but the initial deposit to begin a jumbo CD account differs greatly than a regular certificate of deposit startup principal. The term jumbo actually infers that the initial investment in the account is considerably large.
Jumbo CD accounts are usually associated with fairly nice interest rates that are compounded monthly and there are some Jumbo CD accounts that are accompanied by quarterly interest. If an investor is looking to make the most money they can on Jumbo CD accounts, they are going to want to go with the account that compounds interest often.
The initial deposit for CDs is typically no less that 100,000 dollars. Investors looking to secure their money in a low risk investment prefer the Jumbo CD over other forms of investments like money market funds or stocks which can prove to be quite volatile. Like the standard certificate of deposit accounts, Jumbo CD accounts require that the principal investment remain in the account for a predefined period, also known as the term of the CD. The term of the CD varies, depending upon the lending institution and the choice made by the investor.
Jumbo CD accounts are not FDIC insured by the Federal Deposit Insurance Corporation because the corporation only covers deposits up to 100,000 dollars. Thus, standard CDs are covered by the FDIC, and offer an investor a lower investment risk than a Jumbo CD; this fact should be taken into account before the investment is made. Finally, another consideration that an investor must make before investing in Jumbo CD accounts is that such accounts cannot be as conveniently liquidated as other accounts: penalties may apply for early withdrawal.
When an investor decides to purchase certificates of deposit, they must find the very high rates. It is imperative that the investor do some research in order to find the best cdrates because the rate of interest on a certificate of deposit remains fixed during the duration of the CD. When the certificate of deposit finally matures, the investor receives the initial amount of money they used to purchase the CD plus interest.
Higher Rates on CDs
Many investors opt for CDs because the interest rates associated with certificates of deposit are higher than those associated with other investments. Another benefit derived from the investment into CDs is that the CD investment is more stable than other investing options. Finding the best CD rates is now easier than ever because the investor has an array of researching options available to them. The Internet has made it completely possible to find the best CD rates with relative ease.
Local Banks Offer Specials on Certificate of Deposit Accounts
CDs can be started just by visiting a local bank and some banks actually allow a person to invest in CDs online. Once a CD account is opened, it is open for a predetermined period at the highest rates. When the CD finally matures, the investor has the option of reinvesting the money into new certificates of deposit or cashing them. A CD can be withdrawn early, but there is often a penalty attached to early withdrawal. Investors also must note that money cannot be added to a CD account once it has been established. If the investor wants to put more money into CDs, a separate CD will have to be opened and established.
Finding the Highest CD (Certificate of Deposit) Rates
When seeking the best CD rates, the investor will have to make sure they read all of the fine print. While a CD rate may seem like an excellent rate, there may be certain fees or regulations that actually reduce the seemingly beneficial high interest rate. Research is key to successfully investing in certificates of deposit.