When you invest money for a short term goal, taking extra risk is like playing with fire. The best short term investments will preserve your money.
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For those looking to earn boost yields on cash long-term, a CD can be helpful. However, locking up all of your cash assets for a long period of time can mean that you miss out when rates start to rise.
While it’s true that certificates of deposit can provide you with a safe place to park your cash, it’s important to realize that you need more than just CDs in your portfolio.
Sure, you can get CDs with the highest rates, but even the highest rates now are much lower than the yields you could see back before the 2008 financial crisis. Indeed, CD rates are much lower now, thanks to the economy — and the measures being taken to help stimulate the economy.
One of the ways you can shore up your financial future and prepare for setbacks is to build an income portfolio. With careful planning, CDs can be included in this portfolio.
If the yield on a CD is high enough, it can beat inflation, providing some (low) returns, while helping you preserve capital. But what happens if inflation arrives in full force, while you are still locked into today’s low interest yields?