Investing $10,000 in a long-term CD now can help your money grow significantly over time. Getty Images
Making informed decisions about where to park your savings is important in any economic climate, but it’s especially important in today’s volatile interest rate environment. Now that inflation is calming and interest rates are expected to fall further in the coming months, it makes sense to find the best way to secure a high return on your cash. And for savers looking for reliable, low-risk investment options, opening a long-term certificate of deposit (CD) is one way to do so.
Other savings vehicles, such as high-yield savings accounts and money market accounts, currently offer decent returns, but their interest rates fluctuate and could potentially decline as the broader interest rate environment changes. , and could probably go down. In contrast, long-term CDs lock in your rate and guarantee a steady return until your account matures. This makes CDs especially attractive at a time when the Federal Reserve has already cut interest rates once and is poised to continue doing so in the coming months.
With the right term and interest rate, investing $10,000 in a long-term CD can earn you a lot of interest, allowing you to steadily and safely grow your wealth over time. But returns aren’t the only reason to take this action now.
See now how much more you can earn when you buy top-rated CDs.
Why you should put $10,000 into a long-term CD now.
Here are some reasons to put $10,000 into a long-term CD now.
Long-term CD prices remain high
CD interest rates are still relatively high, so now is the perfect time to lock in a fixed rate. Although the Federal Reserve’s interest rate cut in September lowered borrowing costs, it has not yet had a significant impact on CD rates, and many banks and credit unions still offer competitive rates on long-term CDs. For example, you can now find five-year CDs with interest rates as high as 4.35%. This far exceeds the returns you get with most standard savings accounts.
By acting now, you can secure this high interest rate for the entire term of your CD, no matter what happens in the broader economy. This is especially advantageous as financial markets expect further rate cuts from the Federal Reserve in the coming months. If such a reduction occurs, banks are also likely to lower their CD interest rates. Deposit $10,000 now and never miss out on these competitive rates.
Find today’s best CD rates here.
CD rates could drop quickly
The Fed is expected to continue lowering rates in the near term, with analysts predicting another 25 basis point rate cut in November and December. While this may be good news for those who want to borrow money, it poses challenges for savers. When interest rates drop, banks typically lower the interest rates they offer on new CDs and other savings accounts. That means if you wait too long, you might miss it.
The longer you wait, the more likely you are to find a lower interest rate when you finally decide to invest in CDs. By putting $10,000 into a long-term CD now, you essentially avoid this risk. Even if interest rates on new CDs drop in the coming months, you can lock in a high fixed rate now and earn that rate for the life of your CD. However, waiting can be costly in terms of lost interest income.
Potential for big profits
One of the best reasons to invest $10,000 in a long-term CD is the potential for big returns. For example, let’s say you put $10,000 into a 5-year CD with an interest rate of 4.35%. You will earn approximately $2,372.34 in interest over five years, and by the time the CD matures your total balance will be $12,372.34. This is a significant return for a low-risk investment.
Even if interest rates drop during that period, your 4.35% interest rate will continue to earn you money, ensuring your money is working for you. This predictability, along with higher returns compared to typical savings accounts, makes long-term CDs an attractive option for those looking to grow their savings without taking on additional risk.
CDs provide portfolio diversification and stability
In addition to attractive returns, investing in long-term CDs can also play an important role in diversifying your investment portfolio. Stocks and bonds have the potential for higher returns, but they also come with increased volatility and risk. In today’s unusual economic climate, you may benefit from a combination of more stable options.
This is where CDs come into play. CDs offer guaranteed returns. In other words, CDs act as a stabilizing force in your overall financial strategy. This is especially valuable during times of economic instability, as it ensures that some of your assets are protected from market fluctuations.
conclusion
In a financial climate where interest rates are likely to fall, locking in a long-term CD with a high interest rate can be a wise choice. By depositing $10,000 into a CD today, you can take advantage of today’s high interest rates, protect yourself from future interest rate cuts, and enjoy big returns on a low-risk investment. Plus, you get the added benefit of security, as your principal is safe and your return is guaranteed. However, don’t wait too long as this opportunity may not last long.
angelica leicht
