INVESTOR’S CHOICE: Are CDs a good investment?
Many professional investors will agree that the best place to save money is somewhere it can grow. Certificates of deposit, or CDs, are a type of savings account with a fixed interest rate and terms insured by banks, thrift institutions, and credit unions.
They come with a specific term length that can usually go from the fastest as three months to long-term five years, in which the money you put into the CD typically can’t be spent without paying penalty fees. They generally are structured to offer higher interest rates due to the inaccessibility of the capital within the duration of the CD; this means, the longer the term length, the higher the interest rate.
Investing in a high-yield money-market account, a certificate of deposit, or a savings account can put a high amount of extra cash in your savings for the long run and some savers even implement a strategy where they optimize fixed interest rates and different term lengths.
Even investors consider Certificate of Deposits an useful tool thanks to being a safe investment coupled with their interest rates. And while the stock market can usually yield a higher ROI, the money invested is not as liquid and easily accessible. You also have currency trading that given the proper timing can net bigger profits but the volatility of some assets can increase the chance of you losing your investment. With CDs the money invested and its returns are always guaranteed since its backed by an institution.
Recently, the interest rates for savings accounts in USA have gone up from 2.25% to 2.5%, resulting in online savings accounts finally outpacing inflation for the first time in a decade, with their highest annual yields. Needless to say, this kind of investment is even more popular right now.
Also, high-yield savings accounts have enjoyed popularity over the past decade benefiting from the banking sector slowly adopting an increasingly online strategy that has led to offers of progressively higher rates. When traditional savings accounts have offered an average interest rate of 0.1%, the top high-yield savings accounts are touting annual percentage yields of approximately 2.35%. But, the highest-earning CDs offer an average of 3% APY. Uncertainty about future rate hikes or cuts, has made CDs even more appealing for some savers.
How this works is if the projections show rates descending, you can lock in a high rate today through a long-term CD, or if rates have a high potential to rise later in the year, you could take advantage of today’s rates by parking your money in a short-term CD so you can later trade up when they increase.
So, the main trade-off with a CD is liquidity and guarantee for your money by tying it up to a backing institution for a specified period of time. For small investors and savers, the low entry for CDs and high-yield savings accounts is also an attractive aspect, since they usually require a minimum deposit, from $1 to $25,000 or more. And finally, another beneficial aspect is that most interest earnings yielded by CDs are taxed as ordinary income.
These are all good-looking sides to CDs, for sure. But not everything is without limitations, and while high-yield savings accounts enforce a limit of six withdrawals per month, cashing out on a CD before the term’s end will usually incur in penalty fees, significantly reducing earnings from those higher rates.
Due to these limitations, CDs are almost exclusively rendered useful for investments geared towards a long-term project where you slowly build your capital towards like down payments or a home-improvement projects. If losing access to your money, which is a limited liquidity, for a few months or years, a CD may not be the best option.
When you look at CDs from an investing viewpoint thing start to look even more limited, even with the added guarantee earnings yielded by CDs can’t really compare to the profits some professional investors can net on by investing on the stock market or even trading. And yes, investing and trading doesn’t really have any other guarantees than effectively reading the signs the market movement has; even Venture Capital is not without risk and you have the added difficulty of area expertise to be able to identify the right project to back, but committing your capital for an extended period of time for lower returns and limited use for profitable ventures or investments can also be seen as a loss.
The truth is that currently there’s no perfect investment tool. No matter how advanced the banking and financial sectors have gotten through the years, with the current technology and global system, limits are still a reality. And you as an investor will still need to analyze your options carefully.
Having a lot of options is not necessarily a bad thing, the problem comes when all of the existing options won’t truly offer a new way of generating profit and break the old limits.
But this doesn’t have to be your reality anymore. Enter the FinTech sector, also called Financial Technologies market, a rapidly evolving industry that’s allowing global finances to advance and properly meet the needs of a new generation of investors by developing groundbreaking tools and apps.
This is the sector responsible for engineering what you now know as mobile banking; and right now, it’s still changing the landscape with innovative trends such as blockchain integration and machine learning.
A new and promising project within this sector is actually turning a lot of heads from experts and professional investors with their new asset class. An investment tool with intrinsic value that coincidentally is looking to mix to a number of characteristics from conventional assets in an effort to leave behind their limitations.
Konzortia Capital is the name of this forward-thinking holding company, and together with its consortium of FinTech companies have created this new asset class, Koura. Koura is bridging the gap between digital equities and fiat currency to offer a highly liquid investment tool backed by the shares of this consortium and designed to also be a transactional currency that you can trade at any moment.
“CDs, high-yield saving accounts, equities and even money as things of the past.” This is Konzortia Capital vision for a long overdue and very much needed financial revolution. If you have true vision and you’ve been waiting for what’s next from the financial sector, don’t hesitate to learn more about them. All you have to do is be sure to follow the link below!