Population Statistic: Read. React. Repeat.
Tuesday, February 12, 2021

As one of the most conservative investment tools out there, no one expects bank-issued certificates of deposit to dramatically fatten up your bank account. But you’d think they would at least keep up with inflation:

But anyone turning away from market risk could be giving a big wet kiss to purchasing-power risk — the chance that their money grows more slowly than the rate of inflation — and there is little doubt that the majority of people investing in CDs now fall into that category…

Currently, according to Bankrate.com, the average two-year CD nationwide yields 2.5%; the top two-year certificate of deposit available nationally is from InterVest National Bank and has an annual percentage rate of roughly 4.1%, or equal to the pace of inflation.

So while you’re not going to lose any money with CDs (assuming you’re smart enough to stick with an FDIC bank), they’re not going to produce enough to justify the amount of time that they’re tying up your money. Given that a lot of retirees and other groups rely upon regular CD rollovers to keep revenue flowing out of their savings, it makes for a potential disaster.

Personally, I’ve been decidedly underwhelmed while looking at CD offers lately, even before coming across this inflation-ratio measurement. Again, I realized slow-growth low-risk is the purpose, but really, such paltry yields are pretty hard to take for the length of time they require. I don’t have a ton to invest, which makes CDs that much less appealing.

by Costa Tsiokos, Tue 02/12/2021 10:48:40 PM
Category: Business
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