Just a couple of additions - the rate you see on a CD is usually annualized, so if you only buy a 6 month CD at say 5%, expect to only really get back 2.3%-2.4%.
CDs should pay higher rates than savings accounts because they are less liquid (its harder to get your money out before the term expires)
Investments of this type (money markets, Cds, etc) are covered up to $100,000 by FDIC - so if you plan to invest more than that, use more than one bank.
One final piece of advice - don't put money into a CD if you think there is any chance you will need it before the term ends. If you wanted to invest say 10k - I'd invest 5k for 6 months, and then 3 months later invest the other 5k and then reinvest as the money becomes available - this way you will have the opportunity to withdraw 5k every 3 months, instead of 10k every 6 months. the only thing you miss out on is the first 3 months of interest on the 5k.
On a side note - if you have 200k lying around in a money market account - you should 1 - learn about financial management - or hire a financial advisor - if you were a client of mine I could easily get you 8% a year in liquid corporate bonds that have essentially no risk. 5% on 200k per year gets you $10,000, 8% is $16,000 and I think $6,000 is a lot. Evenmore, investing in a variety of things could easily bag you on average of 12%-15% a year and now we are talking about $24,000 - $30,000 a year - a full ~$20,000 more than just having it in CDs or a money market account.Statistics: Posted by mapleleaf — Tue Aug 08, 2006 6:39 am
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