Smart Investors Are Avoiding 12-Month CDs, Even With Rates at 5%. Here's Why

Motley Fool11-25 21:15

KEY POINTSCD rates play a huge role in how much you earn in interest, but they're not the only factor worth considering.CD rates are falling with more cuts expected soon.CDs could be too risky or too ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2486667087?lang=en_US&edition=fundamental","thumbnail":"https://g.foolcdn.com/image/?url=https%3A%2F%2Fm.foolcdn.com%2Fmedia%2Faffiliates%2Fimages%2FTwo_men_in_thought_looking_at_laptop_screen_1.width-1200.jpg&op=resize&w=165&h=104","is_english":true,"pubTime":"2024-11-25 21:15","share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","id":"2486667087","market":"fut","top_or_hot":-1,"title":"Smart Investors Are Avoiding 12-Month CDs, Even With Rates at 5%. Here's Why","media":"Motley Fool","content":"<div>\n<p>KEY POINTSCD rates play a huge role in how much you earn in interest, but they're not the only factor worth considering.CD rates are falling with more cuts expected soon.CDs could be too risky or too ...</p>\n\n<a href=\"https://www.fool.com/money/banks/articles/smart-investors-are-avoiding-12-month-cds-even-with-rates-at-5-heres-why/\">Source Link</a>\n\n</div>\n","source":"fool_stock","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Smart Investors Are Avoiding 12-Month CDs, Even With Rates at 5%. Here's Why</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nSmart Investors Are Avoiding 12-Month CDs, Even With Rates at 5%. Here's Why\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-25 21:15 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.fool.com/money/banks/articles/smart-investors-are-avoiding-12-month-cds-even-with-rates-at-5-heres-why/><strong>Motley Fool</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>KEY POINTSCD rates play a huge role in how much you earn in interest, but they're not the only factor worth considering.CD rates are falling with more cuts expected soon.CDs could be too risky or too ...</p>\n\n<a href=\"https://www.fool.com/money/banks/articles/smart-investors-are-avoiding-12-month-cds-even-with-rates-at-5-heres-why/\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU2360107671.USD","symbol_name":"BGF FINTECH \"A4\" (USD) INC","start_time":0,"source_url":"https://www.fool.com/money/banks/articles/smart-investors-are-avoiding-12-month-cds-even-with-rates-at-5-heres-why/","article_id":"2486667087","we_media_id":null,"thumbnails":["https://g.foolcdn.com/image/?url=https%3A%2F%2Fm.foolcdn.com%2Fmedia%2Faffiliates%2Fimages%2FTwo_men_in_thought_looking_at_laptop_screen_1.width-1200.jpg&op=resize&w=165&h=104"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2486667087","pubTimestamp":1732540500,"sourceInfo":{"source_id":"fool_stock","name":"Motley Fool"},"weMediaInfo":null,"summary":"Short-term CDs have the highest rates right now, but they're probably not the wisest investment for you. Here's why and where to invest instead.","collect":0,"end_time":0,"defaultTopTitle":"fool.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU2360107671.USD":"BGF FINTECH \"A4\" (USD) INC","LU0648000940.SGD":"Natixis Harris Associates Global Equity RA SGD","LU1201861165.SGD":"Natixis Harris Associates Global Equity PA SGD","BK4166":"消费信贷","LU1201861249.SGD":"Natixis Harris Associates US Equity PA SGD-H","BK4211":"区域性银行","LU0211331839.USD":"FRANKLIN MUTUAL GLB DISCOVERY \"A\" (USD) ACC","LU0980610538.SGD":"Natixis Harris Associates US Equity RA SGD-H","ISBC":"投资者银行","LU0648001328.SGD":"Natixis Harris Associates US Equity RA SGD","BK4588":"碎股","IE00B19Z3581.USD":"Legg Mason ClearBridge - Value A Acc USD","LU0130517989.USD":"HARRIS ASSOCIATES US VALUE EQUITY \"R\" INC","LU0477156953.USD":"HARRIS ASSOCIATES US VALUE EQUITY \"RE\" (USD) ACC","IE00B19Z3B42.SGD":"Legg Mason ClearBridge - Value A Acc SGD","LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元","LU0130518102.USD":"HARRIS ASSOCIATES GLOBAL EQUITY \"R\" INC","CD":"秦淮数据","BK4116":"互联网服务与基础架构","COF":"第一资本","LU1861217088.USD":"贝莱德金融科技A2","LU0130102774.USD":"Natixis Harris Associates US Equity RA USD","LU1861220207.SGD":"Blackrock FinTech A2 SGD-H","LU0130103400.USD":"Natixis Harris Associates Global Equity RA USD","LU0477156797.USD":"HARRIS ASSOCIATES GLOBAL EQUITY \"RE\" (USD) ACC","IE0002270589.USD":"LEGG MASON CLEARBRIDGE VALUE \"A\" (USD) INC","BK4516":"特朗普概念","BK4585":"ETF&股票定投概念"},"translate_title":"聪明的投资者会避免12个月期CD，即使利率为5%。原因如下","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ISBC":1,"CD":1,"US7Y.BOND":0.9,"US10Y.BOND":0.9,"US12M.BOND":0.9,"US2Y.BOND":0.9,"COF":0.9,"US30Y.BOND":0.9,"US3Y.BOND":0.9,"US5Y.BOND":0.9,"US6M.BOND":0.9},"content_text":"KEY POINTSCD rates play a huge role in how much you earn in interest, but they're not the only factor worth considering.CD rates are falling with more cuts expected soon.CDs could be too risky or too conservative, depending on your risk tolerance and plans for your cash.When choosing a bank account like a savings account or a certificate of deposit (CD), most people head straight for the highest interest rate they can find. It's not difficult to follow their logic: Higher interest rates often lead to more money for you.But it's not always that simple, especially when you're talking about CDs, which require you to lock your money away for months or even years. The best investors know that. That's why they're staying away from short-term CDs, even though they promise the highest interest rates right now. Here's why and where you should put your money instead.Interest rates aren't the only important factorHow much you earn in interest depends on the interest rate and how long you invest your money for. Say you have a choice between a 6-month CD or a 12-month CD, both with 5.00% APYs. If you invest $10,000, you'd earn about $247 with the 6-month CD and $500 with the 12-month CD. No big surprises there: If you invest your money for longer, you'll get a larger return.However, you also have to tie your money up for longer. That's why most banks typically offer higher rates on long-term CDs to incentivize customers to pick a longer term. That's not the case lately, though. High inflation has driven up short-term CD rates faster than long-term CD rates, and that's left some people scratching their heads about where to invest.Our Picks for the Best High-Yield Savings Accounts of 2024American Express® High Yield SavingsAPY4.00%                        Rate info                Circle with letter I in it.      4.00% annual percentage yield as of November 25, 2024. Terms apply.      Min. to earn$0Read Review                                                  Member FDIC.                                              APY4.00%                        Rate info                Circle with letter I in it.      4.00% annual percentage yield as of November 25, 2024. Terms apply.      Min. to earn$0Capital One 360 Performance SavingsAPY3.90%                        Rate info                Circle with letter I in it.      See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Nov. 21, 2024. Rates are subject to change at any time before or after account opening.      Min. to earn$0Open Account for Capital One 360 Performance SavingsOn                          Capital One's             Secure Website.                                                  Member FDIC.                                              APY3.90%                        Rate info                Circle with letter I in it.      See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Nov. 21, 2024. Rates are subject to change at any time before or after account opening.      Min. to earn$0Western Alliance Bank High-Yield Savings PremierAPY4.46%                        Rate info                Circle with letter I in it.      The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.      Min. to earn$500 to open, $0.01 for max APYOpen Account for Western Alliance Bank High-Yield Savings PremierOn                          Western Alliance Bank's             Secure Website.                                                  Member FDIC.                                              APY4.46%                        Rate info                Circle with letter I in it.      The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.      Min. to earn$500 to open, $0.01 for max APYThe answer lies in what we expect CD rates to do going forward. With inflation cooling, they're beginning to decline. That means future CDs will likely pay less interest. If you hope to invest for a few years, locking in a short-term CD right now could hurt you in the long run.For example, say you have $10,000 you want to keep in CDs for three years. You're deciding between three 1-year CDs and one 3-year CD. The 1-year CD offers a 5.00% APY right now while the 3-year CD only offers a 4.00% APY. But when you open your second 1-year CD, the rate has dropped to 3.50%. And by the time you open your third, it's down to 2.00% APY. The table below illustrates how much your balance would be at the end of each year with each option:                                                                              Year (1-Year CD Rate/3-Year CD Rate)                                                                                                                                                Three 1-Year CDs                                                                                                                                                One 3-Year CD                                                                                                                                                            Year 1 (5.00%/4.00%)                                                                                                                                                                        $10,500                                                                                                                                                                        $10,400                                                                                                                                                                        Year 2 (3.50%/4.00%)                                                                                                                                                                        $10,868                                                                                                                                                                        $10,816                                                                                                                                                                        Year 3 (2.00%/4.00%)                                                                                                                                                                        $11,085                                                                                                                                                                        $11,249                                                                              Data source: Author's calculations. All amounts rounded to the nearest dollar.By locking in a high rate for a longer period, you come out ahead compared to three short-term CDs, even though the initial 1-year CD has a higher APY. In our example, the difference is pretty small. But if you invested a larger sum or over a longer time period, the single long-term CD would come out ahead by a larger margin.Where to keep your money insteadThe best place for your money right now depends on the level of risk you're comfortable taking and when you plan to use it. If you're determined to invest in CDs, medium to long terms are better bets than short terms as long as you're comfortable giving up access to your money for that amount of time. Check out this curated list of some of the best CDs our experts recommend now.But CDs could be too risky or too conservative in some situations. It's too risky for your emergency fund or savings you plan to spend before the CD term is up. You need a high-yield savings account for that. We have a list for that too. Click here to check out the top high-yield savings accounts paying 4.00% APY (or higher) right now.On the other hand, if you're investing over a long time horizon -- seven or more years from now -- you're much better off investing your money in the stock market if you're comfortable doing so. There's a risk of loss associated with this, but you could also gain far more than you could with even the best CD rates.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2486667087"}