The negative aspect is that the interest returned on CDs can probably
not keep up with inflation. Most of the banks and other institutions
offer competitive rates on CDs that do not tweak much in the rate of
interest.
You are not going to get rich investing in CDs. Perhaps between 2 and 3 percentage points of interest can be earned on a 5 year CDs and you are locking your cash in for a long time in which interest rates can rise widely leaving you behind in profits. However, you would close out your CDs if this occur with maybe simply a month of interest lost. CDs are superb financial vehicles for people who are not sure or have not yet decided where to place their funds to invest.
Investing in CDs is essentially a place to park the income and get some interest while the decision is being made. In addition, the CDs are insured by the FDIC (Federal Deposit Insurance Corporation), which has never missed a payment. CDs can be acquired for differing amounts of time, depending on your plans and are considered time deposits. Sometimes rates differ when purchased at the bank or online. Check the differences in rates carefully before Investing in CDs. When Investing in CDs decide if you need a few CDs or just one jumbo type.
If you get a jumbo type and need cash for an emergency, the one month interest lost is just for the amount withdrawn not for the entire amount, though it is wise to get more than one of the CDs. Investing in CDs is an fine idea for those on a fixed income. CDs can not go bust and elderly individuals do not have to worry about losing funds. The negative aspect is that the interest returned on CDs can probably not keep up with inflation. Most of the banks and other institutions offer competitive rates on CDs that do not tweak much in the rate of interest.
