Are certificates of deposit even worth getting?

Question

Is putting your money in a cd even worth it? Rates are never anything spectacular. I feel if i put $2000 in a cd at 4% for 1 year and get only $82 at the end, that it just balances out because of inflation. What are your takes on CD's?

Answer 1

If your not investing long term with that amount of money then a CD is a safe place to park it short term. You will get less letting it sit in a savings or checking account.

CD's do play a roll in many investors overall planning. I have money in many things as well as CD's. I have CD's of varying  maturity dates. This is called laddering. I have CD's maturing every 6 months. I have 6 month, 1 year, 2 year, 3 year ,4 year and 5 year CD's. Every 6 months I have cash to use or reinvest. I will take the most current money and put it back into a 5 year CD. With interest rates constantly changing I get advantage of the higher rates when they occur.

You may not get rich on them but remember what Warren Buffet says, " The first rule of investing is not losing money. The second rule is never forget the first rule." You will never lose money with a CD.  

Answer 2

If you have a large tax bill and do not wan to invest but save, you should buy a 6 month CD that will go into 2009.  No 2008 taxes.  But, I would personally use the 2K to pay off any debt in my life.  

Answer 3

you should invest in TIPS, which are inflation-indexed tbills.  that way you'll atleast stay on top of inflation.   The answer to your question depends on YOUR risk tolerance and required returns, liqudity needs, etc.

Hey, you could've lost money had you invested in stocks.  Maybe look into preferred stock or highly rated (A, AAA, A - , etc) corporate debt.