A Few Reasons Not To Invest Into Bank CDs
I see it all the time, ads saying things like, "invest into our CD and make 2% a year". Honestly most CDs just seem like a waste of time to me. They seem more like something that will prevent you from reaching your financial goals.
CDs may be safe, but it along with other investments that have "no risk" just seem like a bad idea to me for a few different reasons.
1. They Don't Even Match Inflation
What I don't get is why would somebody invest into something that is going to give them a return of 2% when inflation is 3-4%. That is a for sure way to lose buying power.
This is the equivalent to putting your money into a piggy bank with a small hole at the bottom. It will still grow as long as you put money into it, but a few coins will fall out of the bottom from time to time meaning you would be better off just putting it into a jar under your bed.
Breaking even should be the minimum requirement for every investment and that means it has to go up at least 3% a year, actually even more due to taxes.
2. Banks Invest Your Money
Banks invest that money into stocks and other assets that make them more money. In short whenever you put your money into a bank they take it and start investing it. Out of the profits they pay you a few pennies to keep you happy. And people think this is a good deal.
3. Plenty of Better Investments
There are just so many better investments out there. For instance the average stock market return in 10% a year over the long term. Try getting a 10% return at a bank and you'll get kicked out. Honestly with all the investment options out there anything that doesn't make you at least a 2 digit return isn't worth the time. At least in my opinion.
Article Source: FxTradingStock.com
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For more information about the stock market visit Shaun's site about the stock market basics
by: Shaun Rosenberg
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Word Count: 339
Date: Sun, 4 Jul 2010
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