Online Certificates of Deposit
Did you know that you can buy CD or certificates of deposits online through your broker? I didn't realize this was available until the following happened to me. I don't know if you are as frustrated with stock market as I am. I feel like I have been treading water for at least the last 6 years. I have been saving for college for my kids for a long time only to enjoy about a 4% return on their mutual fund that I invested in. So anyway, I got tired of the performance and I moved their savings into a Schwab account. I figured I could spread the investment out among a bunch of different mutual funds in different market segments, check out my artical on investing in mutual funds.
So I got a good start on investing and I picked out 2 mutual funds and then May of 2006 came and the market started tanking. So I guess I was glad that I didn't invest all of the transfer money into the stock market. Several months went by and I didn't do anything and the cash was just sitting in the money market. So finally I got online and did some research on the CDs offered by Schwab. I was really excited to find that I could buy CD online through Schwab. This is not an article about Schwab but it was really convenient how they set this up. If you have ever bought a CD through a bank or credit union it is sort of a pain. You have to actually go to the bank and sign a small contract. Since I don't go to the bank very often this is not convenient.
Anyway, with the Schwab account you simply goto their website and select the rate and durations that are available and you buy the CD online. You can buy CD with maturity rates as short as 1 month. I bought a CD with a 2 month maturity rate of 5.3% on an annual basis. I was really impressed with the ease of this transaction and the fact that I could buy such a short duration so my investments could earn at least a decent return while I was waiting to figure out what to do with them.
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