When creating your investment plan, have you considered investing some money in a Certificate of Deposit, or CD? Put simply, a CD is a financial product that works similar to a savings account. The difference is that when you invest in a CD, you put all of your money in at one time, rather than a little at a time. Withdrawing your money will depend on the length of time you buy, ranging from six months to five years or more, when depositing your money. In return for your money, the bank pays a set amount of interest determined by the market at the time. Penalties will be applied if you try taking out your money before the CD matures.

CD Advantages

A well thought out investment plan will include growth, stability and income-producing investments. CD's are in the stability category, because they offer little to no risk to your money. While you will not see large returns, you will also not see large losses. Your return is guaranteed and disclosed to you when you purchase the CD. Your money will be there when it matures, or comes due. This is due to the fact that these are insured by the FDIC the same agency that protects your checking and savings accounts, should there be another Great Depression.

CD Disadvantages

The downside of a CD is that they do not give you a large return on your money. A large sum of money at maturity is not likely to happen, even if you purchase a 15 year CD. You can, however, see a larger return from buying a bond. But if you need a variety of stable investing options, a CD is a good place to hold your money.

Variety of CD's

Just as there are a multitude of investing options in the stock market, so there are a multitude of options when it comes to CD's. With a Variety from Traditional to Zero Coupon the options fall into the individuals needs.

Bottom Line

You want to keep the money you have, while perhaps seeing some nice growth as well, or you need to park some funds for a short period of time. Then C.D.'s will and can be a great part of your portfolio. CD's are meant as a short term method to holding your money and protecting it from the fluctuations of the market, which is what you should use them for.