Here’s how much you could make if you invested $2,500 in CDs today:

Today, investors have an unprecedented opportunity to purchase certificates of deposit (CDs) at very competitive interest rates. In fact, there are dozens of CDs offering yields of 5.00% or more. But is it worth the investment? How much money can you make by buying CDs?

Let’s take a look at what your investment could look like if you put $2,500 in a certificate of deposit.

Investing $2,500 in CDs could yield big returns.

If you have $2,500 to invest in CDs, you have a variety of options. Because this is the minimum investment amount required by several banks. (Some banks may have lower or no minimums, others may have higher ones.)

The amount you can earn will depend on which CD term you choose and which bank you invest in. Let’s take a look at what you could get if you open a six-month, one-year, and five-year CD based on The Ascent’s list of the best CD rates as of April 29, 2024.

Data source: Author’s calculations

As you can see, the longer you invest your money, the more you will earn. This is because interest is paid over a long period of time.

You can also see that the yield on short-term CDs is actually higher than the yield on 5-year CDs right now. This is unusual because longer-term CDs typically offer higher interest rates to persuade investors to keep their money for years. Current economic uncertainty and the Federal Reserve’s willingness to cut interest rates are what is causing this phenomenon (known as an inverted yield curve).

High interest rates on short-term CDs present a great opportunity right now. You can invest without having to invest for a long period of time and earn a decent amount of interest in a short period of time.

Should you invest in CDs?

Because CDs are FDIC insured, you generally don’t lose money on CDs (unless you withdraw your money too early and the penalty exceeds the interest you’ve earned so far). And the rates they offer are some of the most competitive we’ve seen in years. You can earn $527.04 on your investment without actually investing. any The chances of losing are pretty good.

But that doesn’t mean CD investing is right for everyone. The interest rate you can earn is still lower than the 10% average annual return you can get from an S&P 500 index fund. As a result, your money still sits in your brokerage account if you don’t need it for about five years or more. This would provide a long enough timeline that investing in the S&P 500 would have a very small risk of loss. how about you do Investing in a CD requires you to give up liquidity, so money you might need soon (or at any time, such as an emergency fund) doesn’t belong in a CD.

You can lock it down for a few months to five years, but if you have $2,500 that you can no longer use, you should absolutely consider opening a CD today. Check out The Ascent List for the best CD rates and invest your money now before your competitive rates are gone forever.

This savings account is FDIC insured and can earn 11 times the bank’s earnings.

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