Using CDs as an Investment

CD Rates are very low at the present. While the banks are getting basically free funds from the Federal Reserve, they are giving low rates. The highest rate at around 2.5 percent can be obtained at several institutions, but this might not be a wise choice. Inflation is expected to rise and your rate can fall far below that of inflation within this time span. 

A CD (certificate of deposit) is money that is parked until a greater use can be found for it. Many on fixed incomes use this exclusively, because they do not have the funds to risk on investments that are uninsured. A CD is insured by the FDIC (Federal Deposit Insurance Corporation) and the U.S. government stands behind them.  CD Rates are higher than normal savings accounts because they are time deposits.

You commit the dollars for a specified period of time and are not supposed to withdraw the cash. If you do, there is often a penalty equal to the interest from one month. A single CD would be acquired, or many CDs if that is your choice. Only the number withdrawn is subject to a penalty, so it is not needed, as some say, to buy more than one. The minimum number for this sort of deposit is not high as some other investment instruments.  CD Rates remain the same for their duration, and if not renewed the lowest interest rate available can kick in. Keep an eye on when they mature. These instruments should be bought for periods of under a year.