Staying Ahead the Inflation Rate on Your Investments
Certificates of deposit (CDs) are a safe and secure investment for many investors. Unfortunately the return investors get in CDs has been dismal for many years. Last month Market Rates Insight (MRI) released a report showing the average 5-year CD rate was lower than the rate of inflation. This means if you invest in long term CDs you’re not even staying ahead the inflation rate. We all learned in economics 101 your investments have to stay ahead the inflation rate.
You might want to start considering other types of investments that won’t be eaten away by the inflation rate. Treasury Inflation-Protected Securities, or TIPS, provide protection against inflation. This might be a better alternative for you. You can learn more about TIPS here: TIPS
If you still want to invest in CDs stick to short term CDs of a year or less so you can enjoy the increase in rates that should be coming in the next year. You should comparison shop just like you would for any big purchase. Thankfully searching for the best CD rates is easy these days and can be done from your sofa. MonitorBankRates.com has one of the more extensive rates list available that lists national bank CD rates, local bank CD rates and credit union CD rates. Use our rate tables here: CD Rates table.
You shouldn't only search for the highest CD rates there are a few other considerations to make when investing. The minimum deposit amount, the health of the bank, the early withdrawal penalty should all be taken into consideration when investing in CDs.
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