Hi
I was wondering if any Fiero owners here could enlighten me about how the Bank, credit union, etc certificate of deposit(s) work? I looked on the web and no body seems to explain how they work. Thanks for any help!
S.Williams

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1988 Fiero Formula T-tops
CJB 143 of 1252 "factory T-top cars"

The issuer of the certificate takes you money for a specific length of time then give it back to you with interest. You have to let your money stay for the alloted time.

Yes, it is a fixed agreement.

You agree to leave the money with them an agreed upon period of time, so they can depend on that.

They agree to give you an agreed upon percentage over that period of time. They can't change the rate.

Usually, the longer period of time you agree to leave it with them, the higher percentage rate return they will reward you for doing that.

You can almost always request your money back before the end of the time period you agreed upon, if you need to do that for some reason (emergency), but then there are pre-defined "penalties" for doing so. The penalties are that you don't make as much rate of return as you would have made.

So it is a GUARANTEED rate of return for you.

You would have to check the current cd rates to see if it is more than the typical money market fund, etc. But cd's are insured. Technically, money market funds are at risk and you could lose some or all of your money. That would be very rare, though, as most mutual fund companies would rather take profit from other funds and make that losing money market fund whole than take the hit to their reputation. But they aren't legally bound to do that. With cd's, you have FDIC security, I think.

the good: guaranteed rate of return.

the bad: if the rates suck, you don't make that much money.

they ugly: unless you open it under an IRA you have to pay taxes on the return.

this site has some more info on investing.
http://www.fool.com/savings/shortterm/03.htm?ref=smp

quote Originally posted by sostock: they ugly: unless you open it under an IRA you have to pay taxes on the return.

Yes, but this is true about ALL investments that aren't tax deferred. All interest income is taxable if it's over a certain amount.

Thanks everyone!
S.Williams

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1988 Fiero Formula T-tops
CJB 143 of 1252 "factory T-top cars"