How Long to Invest in CDs

Video Transcript

"OK this is John Pinelli, financial representative and today I'm going to be talking to you about how to invest in CDs, what are CDs and how long should you invest in CDs. So CDs which essentially stands for Certificates of Deposit, not compact discs, certificates of deposit are offered through banks and through credit unions and the advantages of a CD would be that you are putting your money in for a fixed period of time whether that be 3 months, 6 months 1 year, 5 years, but it's generally a specified period of time and you're earning an amount that is generally specified at the time of purchasing the CD. Typically CDs are very low risk in fact they're no risk at all. They're insured by the FDIC and for the credit unions, they're insured by the NCUA. And what that means is your money is not going to simply go away the way it could with a stock or and other riskier investments. Now on the flip side, a CD is not going to offer you quite the level of return as some of those riskier investments may offer. Typically a CD might just out pace inflation by a percentage. Maybe a hundred basis points or fifty basis points which would be a percent or a half of percent. So typically you're looking in the range of maybe 3 to 6 percent for some of these CDs. So something to consider when investing in a CD is to consider what time frame is appropriate for you. What your financial goals are and what amounts you're comfortable with putting into something that's lower risk such as a CD. So this has been John Pinelli, financial representative talking to you today about CDs."