A Few Hard Truths About Certificates Of Deposit

More conservative investors will normally use certificates of deposit or CDs. This should not come as a surprise to seasoned investors and finance experts since CDs are well-known for being safer than other investment options. CDs are also not connected to the stock market, which means the risk is incredibly low.

However, critics of CDs argue that the investment causes investors to lose money because of inflation and taxation. The harsh truth is that over the past seven years, the average six-month CD rate has never exceeded 1 percent. Also for the past seven years, CDs have never yielded a positive “real” return.

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As with all investments, doing a bit of research goes a long way. With a bit of calculation, investors can see just how much they stand to lose (in terms of purchasing power) when they invest in CDs, especially when they consider the effect of inflation and taxes.

A lot of banks never discuss these hard facts with investors, and sometimes, CD owners are taken by surprise when they see how much they’ve lost. And while CDs are known for being safe, the question now becomes, how safe really can an investment be, if it yields a negative overall rate of return?

Barry Bulakites is the co-founder, president, and chief distribution officer of Table Bay Financial Network and is a recognized innovator and speaker in the field of financial services. Visit this page to learn more about him and his work.

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