Bank investments in recent years have become unquestionably uncertain for many investors looking for a nice interest rate which will yield them a nice return. Some have turned from bonds to bank cd rates, and now some are turning away from cd rates to higher risk investments. Why? The main reason is that rates have gone down so much, you are better off investing money in a savings account. Many bank savings accounts can yield double what some short term CD’s can. With that in mind, others have decided to put their money in long term on a higher yield CD to make it worth it. The question is do you want your money tied up for a long period of time?
Many of the larger banks like Chase and Bank of America are probably the last place you want to look. Not only do they have a much larger cash flow than smaller banks, but they also tend to have some of the lowest rates. Chase bank CD rates have been at their lowest in recent months than ever before, and don’t seem to be as appealing to people as they used to be. So the first step in finding a decent rate would be to go to local based banks in your town or city. Many times these banks are looking for new members just as much as anyone else is, and they use the lure of CD’s, Savings account bonuses and Money Market account specials to get you to sign up for an account. If you have the patience to wait, you will find that some banks offer as high as 3% APY on some short term rates. Considering how horrible the economy is right now you might be wise to take them.
Most investors don’t want to have their money tied up in CD’s for long term, so the alternative is a method called CD laddering. This method means that you find the best rates for a short term, and continue to invest every so many months in new CD’s. The purpose of this is to offset any rise or lowering of bank certificates, which will provide you with an even rate across the board long term no matter how the economy goes.
Diversification however is probably the foremost important thing for any investor. If something is not going to make a decent return then you may want to invest in things that are a little more risky. A bank CD is low risk because it is insured by the FDIC on any account up to $250,000 dollars. This means that if anything were to happen with the bank you opened the CD with, you would be insured if the bank went under. This is a safe way to invest, but is obviously only one of many which can help you to diversify your portfolio.
If you are looking at getting into investing with banks, you should call the local banks in your area to see what types of investments will be right for you. Sometimes there are unpublicized specials for new customers which can give you an edge.