Want to invest in CDs? Here’s how to choose the right one:

If you want to invest in CDs, now is a good time to look for them. There are quite a few CDs offering interest rates above 5.00%. Considering you take very little risk with this investment, this is a very competitive rate of return.

But one problem is that there are so many good CDs on the market that it can be difficult to choose the best one for your situation. If you’re having a hard time choosing, here’s what to do.

1. Decide how much you want to invest

Some CDs have no minimum balance requirement at all. You can invest no matter how much you have. Others require you to deposit at least $500 to $2,500 or more. You’ll want to find a CD that won’t require you to invest more than you can bundle.

When deciding how much to invest, think carefully about these two things:

• How much can I invest over the life of a CD? Make sure you don’t need any cash, as there will be a penalty for withdrawing your money early.
• What is the opportunity cost? Money put into a CD is not as liquid as cash in a savings account. And investing in CDs limits your annual returns to about half (or less) of what you would earn if you invested in an S&P 500 fund. So think about what you are giving up by tying up your money in CDs.

2. Decide how long you want your CD to last.

Most CD terms range from three months to five years. That’s a big range of time. No matter which CD term you choose, you’ll receive the promised rate for that term. And to avoid penalties, you’ll need to invest money during that period.

When deciding on CD terminology, consider the following:

• The comfort you get from investing your money over a long period of time: If you are likely to need the money sooner, you should choose a shorter term.
• CD prices for various periods: Currently, short-term CDs are paying more than long-term CDs. This is the exact opposite of what usually happens. This is because you typically get paid more if you agree to invest your money for longer. You may decide to take advantage of the opportunity to earn impressive returns without having to invest a long time.
• The likelihood that interest rates will rise or fall is as follows: If you think interest rates will soon fall, you may want to consider buying a longer-term CD, such as a three- or five-year CD, so you can continue earning the currently high interest rates.

3. Compare shops to find the best price

Once you’ve decided on your time frame and how much you’re willing to invest, it’s time to look around and see the different CD products available on the market. Ascent’s list of the best CD rates is a great place to start. You’ll want to focus on the following:

• Fees paid: The higher the APY, the better.
• Terms: Select your CD based on the term you choose.
• Minimum investment required. Choose CDs that don’t require you to invest more than you consider safe.

After following these three steps, you should be able to identify the best CDs, buy them online, and watch your money grow.

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