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MoneyWatch: Managing Your Money
By Angelica Leicht
Edited By Matt Richardson
/ CBS News
In today's uncertain financial landscape, finding the right investment opportunity can be challenging. After all, the current market is unpredictable, and many investors would prefer to have stability and a decent return on their money without locking it away for an extended period.
This is where a certificate of deposit (CD) comes into play. With a CD, you get a low-risk way of investing your money while earning guaranteed returns. There aren't many other types of investments that can offer the same benefits. And, 6-month CDs are particularly attractive right now, so it can make a lot of sense to deposit $5,000 into one today.
Find the top CD rates you could be earning now.
Why you should put $5,000 in a 6-month CD now
There are a few reasons why it would benefit you to put $5,000 into a 6-month CD now, including:
6-month CDs are offering some of the highest interest rates
One of the primary reasons to invest in a 6-month CD now is the attractive interest rates they currently offer. Historically, short-term CDs have provided lower returns compared to their longer-term counterparts. However, the financial landscape has shifted, and 6-month CD rates are now bucking that trend.
For example, right now, it's possible to find a 6-month CD offering rates of 5.5% or higher, but 3-year CD rates are maxing out at about 4.65%. And the rates on 5-year CDs are also lower on average. This means that by opting to put $5,000 in a 6-month CD, you can grow your money faster in a short time frame without the commitment of a long-term investment.
Learn more about today's 6-month CD rates here.
The fixed rate offers predictable returns
With a 6-month CD, you know exactly what to expect in terms of returns on your $5,000. Unlike the stock market, where prices can fluctuate wildly, your CD will earn a fixed interest rate over its term. This predictability can be particularly appealing to investors who prefer a stable, guaranteed return on their investment without the anxiety of market volatility.
And, while other interest-bearing accounts, like high-yield savings accounts, currently offer comparable rates, they are also variable. So, if you put your money in this type of account and there's an overall drop in the rate environment, chances are that the interest rate you're earning on your $5,000 will, too.
But that won't happen with a CD; you'll continue to earn the same high rate throughout the entirety of the CD's term.
A 6-month CD offers liquidity and flexibility
Six-month CDs offer a balance between locking your money away for an extended period and keeping it readily accessible. While longer-term CDs may tie up your funds for years, a 6-month CD allows you to access your money relatively quickly. If you suddenly need your $5,000 for an emergency or a more lucrative investment opportunity arises, you won't have to wait years to access your funds without incurring hefty penalties.
The risks are low with this type of account
CDs are renowned for their safety and stability. When you invest in a CD, your principal is typically insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) or a similar agency. This means your initial investment is protected even if the financial institution fails, and you'll earn the agreed-upon interest rate over the 6-month period, offering peace of mind and a low-risk investment.
It's a smart way to diversify your investments
Diversifying your investment portfolio is a fundamental strategy to reduce risk. By putting $5,000 into a 6-month CD, you can allocate a portion of your funds to a low-risk, interest-bearing asset. This complements riskier investments in stocks, real estate or other ventures, creating a balanced portfolio that can help mitigate potential losses in more volatile investments.
The bottom line
In today's financial climate, where uncertainty looms and market conditions can change rapidly, putting $5,000 in a 6-month CD is a smart move for many investors. The higher interest rates, liquidity, low risk, diversification benefits and predictable returns make it a compelling option. So, if you're looking for a secure and profitable way to grow your savings in the short term, consider taking advantage of the favorable 6-month CD rates available now.
Angelica Leicht
Angelica Leicht is senior editor for Managing Your Money, where she writes and edits articles on a range of personal finance topics. Angelica previously held editing roles at The Simple Dollar, Interest, HousingWire and other financial publications.
