IRA Investment Strategies
A couple of days ago the market was up 140+ and a few days later down 200+. Are you tired of this roller coaster?
If your at, or nearing retirement and want to take the risk out of your retirement portfolio then consider investing in bank/credit union Certificates of Deposits (CD).
This site, and blog are designed to try and help the unsophisticated investor take advantage of a federally insured investment option. You can protect every penny that you have and earn a small return on your money. By using some of the tips in this site you can improve those earnings.
Please search through the material. I have tried to be as clear as possible, however, if you have a question please feel free to post it. I will responde as I can.
Why Invest in a CD?
The short answer is "preservation of principle" or "I don't want to lose what I have but I want to earn something from it without putting it at risk".
When you invest in stocks, mutual funds, bonds, a bank CD, or most any other investment the amount of money that you initially invest is sometimes referred to as your "principle". With almost all investment alternatives you are putting your "principle" at risk. That means you could lose some, or all of it. If you buy 100 shares of XYZ Corporation at $1/share and the price goes down to $.90/share you have lost $10 of your "principle". The same applies with almost all investments except CD's.
The only way you can lose any of your "principle" in a CD investment is if you withdraw the money before the term of the CD has concluded (see Types of penalties) or you invest more than the insured amounts at that financial institution (see Federal Deposit insurance and Other insurance).
Many people who have, or are nearing retirement age are only interested in preserving their "principle". They don't want to risk what they have accumulated in a 401(k) or other type of retirement plan. A CD accomplishes that goal very nicely.
CD Rewards
What are the Rewards?
The most significant benefit (reward) for investing in financial institution CD's is that the original amount of money that you invested and any accumulated interest it has earned is protected from loss by the federal government and other insurance funds. There are limits to this protection, be sure to read the information in Federal Deposit Insurance and Other Insurance sections of this site.
A CD investment is a contract that says in simple terms "here is my money for you to use for X number of months at the end of which you will give it back to me and you will pay me Y% interest while you have my money". That is a pretty straight forward contract. There are some conditions to this contract specifically directed to situations where you want your money back sooner than the agreed upon number of months (see CD Terms and Conditions).
CD's also allow you to plan ahead unlike any other fluctuating market. When you make a CD investment you know what the terms and interest rate are in advance. Knowing this can provide you an opportunity to develop a CD investment strategy with fixed returns. You can plan a strategy if you think that interest rate will be going up or a different strategy if you think they are going down (see What is Laddering of CD's)
From another perspective, a major benefit of CD's is that they are not subject to stock market fluctuations.
Welcome to CD MAX RETURN
We invite you to share information and comments that have helped you with your Certificate of Deposit investments.