Credit Loan > CD Rates > CDs and Investments: Feel The Burn

CDs and Investments: It Is A Little Like Exercising

Would that be investing if it were easy? Stick a penny in a savings account and come back a thousand years later to have enough to live on for, well, for a long time.

Unfortunately, it is much more like going to the gym. You need to invest in a range of things and work on all the areas. Consider CDs and similar investments, the core, the part that holds everything else, but maybe isn’t so good at lifting barbells or running on the treadmill by itself.

Not to extend the metaphor into the land of the scary, but things like stocks, bonds and money market certificates, are like the arms and legs. They use the support of the core and supplement it. And they can build nice big muscles – everyone wants firm stomach muscles, but I don’t know anyone who wants huge ones.

If your employer still offers a 401(k) and even better, still contributes to it, it is best to give this the best workout you can, by putting at least the maximum amount your employer will match in this account every month. If you do it from the first available point in time, you will very soon never notice the money coming out of your paycheck – and it will be taken out before taxes, providing you with an additional savings.

The best way to invest this is in the low or moderate gain areas – you won’t get rich, but this will provide the balance that is most likely to continue to build and least likely to go high up and then collapse.

Whether your employer offers a 401(k) or not, two other areas that should be invested in are CDs (certificates of deposit) and IRAs (individual retirement accounts). These tools have different interest ranges and strictures, as well as their own advantage sets that are different from the other. Both are FDIC insured, meaning the government backs the investment and you will never lose what you have put in (making it very different from muscle which becomes fat the instant you stop paying attention.)

An IRA, for example, has an upper limit of how much can be invested in any given year, but for many of them, that money can be before tax as well, and will not be taxed until you use it. A CD has no upper limit, but the money you invest will be after taxes and the interest may be taxed.

All investment tools should be thoroughly investigated and applied judiciously. The more varied and balanced your portfolio is, the better off you will be in the long run.