CD investing: taking the middle road

Many low-risk savers who are interested in CD investing face the inner debate of short-term versus long-term. Do you value keeping your funds more accessible, or do you value the highest interest rates available? Well, lucky for you, I’m here to tell you that this inner debate doesn’t really matter right now. When it comes to CDs in today’s market, I vote sticking with the middle of the pack: 1-year and 2-year CDs.

Steer clear of super short-term

To be honest, I struggle to understand why anyone would bother shopping for 1-month and 3-month CDs in today’s market. CD rates on these short maturities are very low – so low, in fact, that I would just vote finding an online savings account that will reward you with interest rates that beat these short-term certificates of deposit.

Locking in for the long-term

Now, it’s true that you’ll find the highest CD rates among 5-year maturities. However, five years is a long time, and I’m hoping that saving rates rise within the next couple of years. Do you really want to lock in to a 2% rate through 2017? I didn’t think so.

Instead, the best strategy is to compare rates among 1-year and 2-year CDs. While they may be a bit lower than 4-year and 5-year maturities, they will leave your funds more readily available if and when CD rates climb. Then, you can start considering those long-term deals.

How to find the best CD rates

The quest to find the best deals on those 1-year and 2-year certificates of deposit begins online. Simply use one of the many CD rate comparison tools to figure out where you will receive the best APY. Be sure to consider other important factors, too, such as minimum balance requirements and early withdrawal penalties.

What are your strategies for CD investing?