How Real Estate Outperforms the Highest CD Rates No Questions Asked
CDs or Certificates of Deposit are good investment vehicles for those seeking a low risk investment for cash they won’t need any time soon. Using an institution with the highest CD rates lets you earn a better rate than you would if you left it in your savings or checking account. CDs are also insured by the CDIC for up to $250,000.
2 Things to Consider when Investing in CDs.
When will you need any of that money? Do you have sufficient alternative financial resources for you to survive or heaven forbid take care of an emergency? If you have a sum that will be sitting in your bank account for over 6 months without being used, those funds could be ideal for investing in a CD. It’s generally designed as a place to park your money when you’re saving up for a large purchase or investment.
2. Interest rate:
The direction rates are heading will help determine how long of a term to which you want to commit. If rates are on the way up a short term CD may be best. However if rates are on their way down you’ll be able to lock in at the highest CD rates.
How to Invest in CDs?
Once you determine that parking your money in a CD is the best choice for you, here are the steps you’ll want to follow;
- Choose the time frame. This will be predicated on when you’ll need your funds returned, and if you have sufficient other funds set aside to survive until your CD matures.
- Determine what type of CD best suits your needs.
Types of CDS
You can choose from the following:
- Traditional CDs: This is where you’ll receive a fixed interest rate over a specified period of time. Be wary because withdrawing before maturity can give rise to some hefty penalties.
- Bump-up CDs: These will allow you to swap out your CD for the highest CD rates if rates on new CDs of similar duration rise during your term. Most institutions that allow this will allow it to happen once during your term.
- Liquid CDs: Although these may not be the highest CD rates, they will allow you to withdraw part of your account without paying a penalty, and are still higher rates that having your money sitting in a bank account.
- Zero-coupon CDs: With this investment your earnings will automatically be re-invested so you’ll earn interest on a higher total deposit, this type of CD also usually pays a little higher interest rate.
- Callable CDs: These are typically offered through brokerages, and allow the issuing bank to recall it after a certain period of time returning your deposit and any interest owed. This is usually done when interest rates fall significantly, but they offer the highest CD rates to compensate.
- Brokerage CDs: These offerings will generally offer a higher interest rate but you’ll also pay a fee in order to take advantage of the brokerage’s access to the thousands of CD offerings.
- Review the rates: Banks will offer different rates for the same type of CD, and consider the strategy called laddering which will give you penalty-free access to your cash each time a CD matures. It’s a favorable interest rates since you are investing in longer term CDs and it gives you an opportunity at better returns if rates are higher when you re-invest.
Those who look to invest in CDs are often willing to sacrifice a better return for security. Although there are risks with every investment, real estate offers some security aspects as well. Accredited investors who partner with Simple Acquisitions obtain tangible ownership in the property. In addition, should the property not be performing as expected, the partners have the right to gain control of the property.
A third advantage of choosing real estate is that as an exit strategy we seek to refinance the properties, return the partners their original investment, and still provide them monthly cash flow which equates to an infinite return.
Investments should be diversified to help spread the risks. If you invest in CDs, consider looking at real estate as another option to diversify your portfolio and obtain great returns as well.
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Disclaimer: Simple Acquisitions only creates partnerships with accredited investors and investors should always obtain advice from professional advisers.