What is a C.D.?

A C.D., or a certificate of deposit, is also called a time deposit, it is a certificate issued by a bank that indicates a specified amount of money has been deposited. A CD has a maturity date and a specified interest rate, and can be issued in any amount.

The duration can be up to five years, and the interest rate earned by the investor increases in proportion to the time that their money is tied up in the CD. They are probably the most popular form of investments for idle cash, although if you desire access to your cash this is not the best choice for you. CDs under $100,000 are called small CDs and are insured by the FDIC, CDs more than $100,000 are called large or jumbo CDs.

In return for lending the money for a set length of time, the investor is paid a set rate of interest. Most institutions will have a fixed interest rate but some have adjustable rates that vary with an index tied to the stock market.

If you are looking to make a large profit in this form of investment and you need to access the cash, financial advisors recommend putting money into different certificates; have some one year and some two year certificates. If you do this, you will have the CDs maturing yearly which will be beneficial when you need cash and you wont have to pay an early withdraw penalty.

It is also recommended to have try CDs with a couple different lenders so you can see which one is the most valuable for you to invest with and which ones you would want to reinvest with. You can also find resources available on the internet that will help you find the best current rates for CDs. CD investing is a good way to protect yourself against changes in interest rates and also gives you the security of knowing youll be able to access some of your money within a short time frame.

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