What are the advantages and disadvantages of investing $1000.00 into a certificate of deposit?

Question

What are the advantages and disadvantages of investing $1000.00 into a certificate of deposit?

Answer 1

If you need the $1k before the term of the CD is up, you'll probably pay a penalty to take the money out.  In other words, it might be cheaper to leave the money in a regular savings or checking account.

The advantage is that the interest rate is typically higher for a CD.  However, to be blunt, for $1000, rate won't make that much difference in actual earnings.  

Answer 2

The advantage is you will make fixed return and the disadvantage is you will only make a fixed return.

Answer 3

Advantage is its very safe (especially if the institution is FDIC insured - make sure it is).  Also you get an ok return and its very easy to do.

Disadvantage is its really a pretty low return compared to some other things and you can't get the money out before the CD comes due, without an exorbitant cost.  Also arguably inflation is higher than most cd rates so in a sense you are actually losing money (or at least losing buying power) if you do this.