Investors who place large amounts of money into CDs are often dependent on the market to continue maintaining high profits. CDs are almost always long term investments which leave an investors money tied up for at least a year and often five, ten, or twenty years. Since the interest rate of a CD reflects the interest rate at the time of purchase and does not change, it can be devastating to buy into a CD right before interest rates rise.
Will CD Rates Rise This Year?
As the economy slowly recovers, employment rates begin to look better and the Dow rises, the chances of the federal reserve raising the interest rates grow. To prevent inflation in the time of recession, it is important to carefully control interest rates. Recovery is often a reliable signal to government officials that it is time to close the flood gates and raise rates. There are no guarantees, but the increasingly optimistic financial reports
When Is It A Good Time To Buy A CD?
Industry analysts predict significant growth in certificates of deposit by early 2010. Investors looking to include new CDs in their portfolio should hold off until then to see where the interest rates are at. It may be wise to only invest in short term CDs if it appears that the interest rates might rise in six months or more. That way the money will still be earning but money won't be tied up for too long. It may also be advantageous to set up a money market account as a stop gap while waiting for CD rates to rise.