Money Management

CDs can be a good investment option. Read on to find out what you need to know before you open one up. [[{“value”:”

Putting some of your money into a certificate of deposit (CD) can be an excellent and safe way to grow your money. Young investors may be especially drawn to CDs right now because of their high annual percentage yields (APYs), some of which are above 5%.

CDs aren’t complicated, but there are a few things you should know before investing your money in one. Here are three important things to remember when opening your first CD.

1. Start small

CDs come in all shapes and sizes. Some CDs only require a few hundred dollars to invest, while others may require thousands of dollars. Some have term periods of just a few months, while others require leaving your money in place for a few years.

When choosing your first CD, it’s best to start with one that has a short term and a low minimum amount required at opening. Why? Because you don’t yet know how you’ll feel about having your money locked up for a while.

How to do it: You may want to choose a 6-month CD with a minimum deposit of just $500. Some CDs pay 5%, earning you $12 in interest. Of course, that’s a meager amount, but if you’re just getting started with CDs, it might be a wise choice before you lock up too much of your cash.

2. Shop around for the best rate

If you’re interested in CDs, you’re probably already thinking about the best ways to grow your money. However, one mistake some new investors make is assuming that all CDs are the same.

The national average rate for a 12-month CD right now is about 1.76%, but you can get far more bang for your buck by shopping around. For example, many CDs you can sign up for online pay 5% or a little higher.

If you invested $5,000 in a 12-month CD with a 1.76% APY, you’d earn $88. But with a 5% rate, you’d make $250 off your investment.

How to do it: Compare CD rates online to find the best one. You can search for the term length you want and your preferred APY and even sort by the minimum deposit amount.

3. Understand the drawbacks of CDs

While CDs can be a great investment, they aren’t perfect for everyone. Some people may benefit more by putting their money into a high-yield savings account rather than a CD.

That’s because CDs charge early withdrawal penalties. The penalty amounts can vary, but in general, CD terms of two years or less charge 90 days of simple interest on the amount you withdraw. CDs with terms over two years charge an early withdrawal penalty of 180 days of simple interest.

Meanwhile, savings accounts don’t charge you when you take money out, and some have interest rates that match or exceed what CDs offer. Your money also isn’t locked into a savings account; you can access any portion of it at any time.

The benefit of choosing a CD over a savings account is that the interest rate can fluctuate with a savings account, while CD rates are guaranteed for the entire term. So if you open a CD with a high rate, you’ll keep earning at that same rate for the length of the CD.

How to do it: Determine why you want a CD and consider whether a high-yield savings account could be a better bet. If you want to earn a high interest rate but need access to your money for emergencies, then a savings account is probably a better option for you. But remember that the interest rate on a savings account is subject to change.

Investing in a CD can be a smart move for people of any age right now. Just keep in mind that it ties up your cash for a set period, so it might feel a bit restricting if you’re not used to that style of investing. But if you’ve got some money you won’t need for bills or unexpected expenses anytime soon, stashing it in a high-yield CD could be a great way to see it grow.

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Buying stocks is one of the best long-term investments, even during times of economic uncertainty. Keep reading to see why. [[{“value”:”

Buying stocks is at the center of many investors’ long-term financial strategies, and the stock market is at the center of everyday life. It’s hard to escape the latest news about the Dow, the S&P 500, and what’s happening on Wall Street.

I try not to worry about the daily ups and downs of the stock market, or get distracted by every last bit of noisy stock market news — but I find the stock market fascinating, and believe that stocks are ultimately one of the best asset categories to invest in. If you want to save for retirement and build wealth for the future, buying stocks is one of the best moves you can make.

Let’s look at a few big reasons why I believe in buying stocks — and why you should join me.

1. Stocks tend to deliver strong long-term return on investment (ROI)

When you invest in stocks, you’re (ideally) doing it because you want your money to grow as much as possible in the long run. Here’s what that looks like in real life: the S&P 500 Index has delivered 10.7% average annual returns for the past 30 years. For example, if you had invested $10,000 in the S&P 500 in 1992, and reinvested the dividends, and held onto those investments for 30 years without panicking or selling shares…you’d have $170,000.

This doesn’t mean that you’re going to get that same 10.7% every year! Far from it; some years, the stock market (and the S&P 500 index, and other broad market indices) go down by 10% or more. Other years, stock prices go up by 20% or more. You never know what the stock market is going to do until it’s too late; no one can predict the future, not even the richest investors on Earth.

But as a general rule, based on the lessons of history and the structure of the global economy, if you believe that corporate America and hard-working people all over the world are going to keep finding ways to innovate, create, produce, and make more money? You should buy stocks. Buying stocks in the S&P 500 or other diversified stock ETFs can help you buy into the collective efforts and ingenuity of millions of talented people all over the planet. To me, that feels like a risk worth taking.

2. Stocks tend to outperform bonds and bills

Sometimes people worry about the volatility (ups and downs) of buying stocks, so they decide to invest in bonds instead. Bonds should be part of the overall portfolio mix for many investors, based on your age and time horizon. Investing in bonds and short-term government debt (like T-bills or other short-term cash equivalents) often feels “safer” than buying stocks, and it can be. Sometimes bond prices go up when stocks go down, and sometimes bonds earn a higher ROI than the stock market.

But in the long run, stocks tend to outperform bonds and bills. According to analysis from author and investor Nick Maggiulli, from 1900-2018, stocks in 24 different countries consistently outperformed bonds and bills by an average of 3%-6% per year. This extra boost of performance is known as the “equity risk premium” — because stocks are riskier than other assets, they can often earn higher returns.

There’s no guarantee that stocks will always do better than bonds and cash; past performance is no guarantee of future results. But in general, if you can stomach the short-term ups and downs of the stock market, you’re likely to earn bigger returns with stocks than you’d get from bonds, bills, or even the best savings accounts.

3. Stocks tend to pay dividends

Another good reason to buy stocks is that stocks tend to pay dividends (a way of sharing their profits with shareholders). Not all stocks pay dividends, and dividend yields are not always a substantial percentage. But every month, I get a little chunk of money in my IRA account from the profits of the stocks that I own in my stock ETFs.

Earning stock dividends feels good. Free money! And I have my dividends set up to automatically reinvest, so that little percentage of cash flow from my stocks is immediately used to…buy more stocks.

Bottom line

Buying stocks lets you own little pieces of big successful companies and share in the future profits of the corporate world, even if (like me) you don’t have a corporate job. Stocks can be risky in the short run and there is a significant risk of loss for any individual stock. But over time, the stock market tends to go up as businesses get more successful and profitable, as more investors enter the market, as the global economy grows, and as money makes money.

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The gender pay gap is not an iron law of nature; it can be fixed. See how your company can become a more supportive workplace for everyone. [[{“value”:”

The gender pay gap is a longstanding, frustrating, and unfair part of everyday life in the American economy — but is there anything that can be done to fix it? As of 2022, according to Pew Research, women in the U.S. earned about $0.82 for every dollar earned by men. Men are often more likely than women to get higher paying corporate jobs; only about 10% of Fortune 500 CEOs are women. Meanwhile, women are often more likely to work in lower-paid occupations like child care, domestic work, and home health aides.

McKinsey research from the Women in the Workplace 2023 report shows that, although women make up 48% of entry-level corporate employees, women are only 28% of the C-suite. There’s a huge dropoff for women in the corporate talent pipeline between entry level talent and C-level executives; not a “glass ceiling,” perhaps, but a “broken rung” on the career ladder. Women are being diverted from the highest-paying, most ambitious career paths.

Fortunately, forward-thinking companies have options to level the playing field in ways that help make work a better deal for everyone — women and men. Let’s look at a few good ideas that could help end the gender pay gap.

1. Formal mentoring programs (for women and men)

Career mentoring is one of the best ways to improve your professional skills and for organizations to prepare promising young talent for upper management jobs. A recent article in Bloomberg cited research showing that formal mentoring programs can increase the number of women in management positions by 10%. And these mentoring programs should be open to everyone, regardless of gender.

The research suggests that when women get access to formal mentoring, they’re often faster to sign up than men. Women also tend to be more likely to use formal mentoring to build relationships with upper management and connect to better career networks. A formal mentoring program can help women boost their professional value, and get tapped for promotions, in ways that might not otherwise happen for them through informal channels.

2. Child care benefits and parental leave

Women’s careers shouldn’t have to suffer just because they decide to have children or take time to serve as caregivers for other family members. But too often, women have had to take time out of the paid workforce so they can take care of family. Smart companies are trying to find ways to support people as caregivers, and in their careers.

Bloomberg also cited research from Harvard Business Review which found that, when companies offer child care benefits, it boosts the numbers of women who go on to get promoted to management. This study of 800 companies found that, seven years after offering child care vouchers and on-site child care centers, companies saw significant increases in the percentage of women and people of color who are retained and promoted to management.

As Sarah Green Carmichael writes in Bloomberg, “When a company introduces child care benefits, it affords greater career stability to everyone. And that stability, in turn, gives a wider array of people a chance to climb the ladder.”

3. Flexible, remote, and hybrid work

One positive change to happen during the COVID-19 pandemic was the rise of remote work and flexible schedules for people formerly known as “office” workers. Remote work was a game changer for working mothers, because this made it easier for moms to manage their careers and their caregiving roles. Working from home can make it easier for women to stay in the workforce, keep their careers and bank accounts on track — and still be there for their families.

But flexible work and remote work is not just about being able to pick up kids at school and do a load of laundry during the workday; remote work is unlocking women’s productivity and career potential. McKinsey’s research also found that women have become more ambitious since the pandemic — and flexible work is helping to shape that ambition.

McKinsey’s Women in the Workplace 2023 report found:

80% of women want to be promoted, compared to 70% in 20191 in 5 women say “flexibility has helped them stay in their job or avoid reducing their hours”A majority of women say that when they work remotely, they have “more focused time to get their work done”A large number of women say that a primary benefit of remote or hybrid work is “feeling less fatigued and burned out“

Women aren’t the only employees who love flexible, remote, and hybrid work; men see it as a valuable employee benefit too. But flexible work could be the biggest change of the 21st century (so far) to help women get more of what they want out of their careers and their personal lives.

Bottom line

The gender pay gap has been stubbornly persistent for many years, but there are signs of hope. If employers adopt just a few smart policies, women can get a fairer chance to thrive in their careers, get promotions and pay raises, and stay on track for higher paying jobs.

These ideas to end the gender pay gap are not just good for women. Formal mentoring programs, caregiver benefits, and flexible work can ultimately make the workplace more inclusive and more family-friendly. Ending the gender pay gap can ultimately make work and life better for everybody.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
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When you’re choosing a CD, you need to consider the rate — but that’s not all. Learn more here. [[{“value”:”

CDs are paying competitive yields right now. So if you’re looking to earn a good return without taking any risk, you may be interested in investing in one. If you are, chances are good you’re hoping to maximize your return on investment (ROI), so of course you’ll be looking for the most competitive rates.

This makes good financial sense. A high rate is better, because who doesn’t want to earn more money?

But as you explore your options, you may discover that you don’t want to invest in the certificate of deposit offering the absolute highest possible yields every single time. Here’s why.

You need to look beyond interest rate alone

The APY (annual percentage yield) a particular CD offers is just one of several factors to consider when you make your investment selection.

If you only focus on rate, you could end up making the wrong investment. Here are a few other things that need to be given equal — or greater — weight.

The CD term

The CD term is arguably the absolute most important factor in a CD, even above rate. The term determines:

How long you must keep your money tied upHow long your rate is guaranteed to last

If you were just choosing a CD paying the highest possible rate, right now you’d most likely be looking at a CD with a term of around one year or less.

A quick look at The Ascent’s list of the best CD rates shows some 12-month CDs paying upwards of 5.00%. There are also some great 6-month CDs with rates above 5.00%. On the other hand, the best 5-year CD rates are generally in the mid-4.00% range in terms of yields.

But choosing a 6- or 12-month CD based solely on its competitive ROI may not be the right bet. If you think interest rates are going to go down soon and you want to lock up a high rate for as long as possible, you likely should open a 5-year CD, even if you have to accept a lower rate to do it.

On the other hand, if you have money you can only tie up for six months, you’d want to opt for a 6-month CD rather than a 12-month one, even if the 12-month CD pays a higher yield.

The minimum required investment

The minimum investment required is also just as important as the CD’s APY. The reason for this is obvious. It doesn’t matter how much better the rate is on a CD with a $2,500 minimum investment requirement if you only have $1,000 to invest.

Now, it may be tempting to try to stretch to open a CD with a better rate that comes with a higher minimum investment requirement. But you don’t want to take a chance of locking up money that you can’t really afford to commit for the duration of the CD term. If you do and you end up having to take the money out early, you could face hefty early withdrawal penalties.

Fortunately, there are plenty of CDs with no minimum balance required to get started. Opting for a CD you can easily afford makes a whole lot more sense than putting yourself at risk by investing money you aren’t 100% sure can stay in the CD until it matures.

So, when you open a CD, you do want to consider yield of course. But if an option with a higher rate isn’t really affordable or available for the right duration, then accepting a lower rate for a CD that’s a better fit for you is the smarter move.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
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Should you put your money into I bonds? Though they’re not for everyone, here are a few good reasons to consider them. [[{“value”:”

In 2022, when inflation was soaring and consumers were racking up credit card debt left and right just to stay afloat, there was a teeny tiny silver lining — the interest rate on I bonds rose tremendously, making them an attractive investment.

If you’re not super familiar with I bonds, they’re government bonds whose interest rate is pegged to inflation. In May 2022, the rate on I bonds adjusted to 9.62%, which drove many people to invest in them. But as of this current May, the interest rate on I bonds has fallen to 4.28%.

That rate isn’t set for good. Rather, it’s effective through the end of October, since the rate on I bonds adjusts every six months based on economic conditions. And while some people might argue that 4.28% is a pretty good rate of return on an investment that’s virtually risk-free, others might say it’s not high enough to make the case for I bonds.

Indeed, other vehicles could put more money in your pocket than I bonds. CDs, for example, are a good choice because they’re paying generously right now following the Federal Reserve’s interest rate hikes. And if you’re investing for long-term goals, buying stocks is generally a far better bet than I bonds. But while I bonds may not be the perfect investment for everyone, here are a few reasons to consider putting them into your portfolio.

1. You could come out a winner if inflation picks back up

At this point, we should hope that inflation will continue to cool rather than reverse course and start surging again. But if inflation does pick up, the rate on your I bonds could adjust upward like it did back in 2022. The result? More money in your pocket.

2. You’re nearing retirement and want an investment that’s safe

I bonds aren’t a great bet for people who are trying to build retirement wealth. That’s because the stock market, historically, has delivered considerably higher returns. But if you’re someone who’s nearing retirement and needs a safer, more stable investment, I bonds could fit the bill. That said, just know that you cannot redeem I bonds for at least a year after buying them, and that there’s a penalty for cashing them out before having held them for five years.

3. You won’t pay state or local taxes on your interest income

It’s not just the federal government that can go after your income. Many states charge their own income tax, and in some cases, you’ll be subject to local taxes, too (for example, residents of New York City pay a separate city tax). The nice thing about I bonds is that their interest isn’t taxable at the state or local level, so you get a tiny bit of a break.

4. You may be able to use your I bond income tax-free to pay for higher education

Given that the cost of college keeps rising, many parents worry about paying for their children’s education. One lesser-known benefit of I bonds is that you may qualify to take your interest tax-free at the federal level if you use it to pay for higher education. There are, however, income limits associated with this benefit that can change over time.

All told, I bonds certainly aren’t the ideal investment for everyone. But it pays to read up on the benefits they offer so you’ll know whether they’re a good choice for you or not.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
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The COVID Crash of 2020 was a formative memory for many young investors. Stock values go up and down; learn how to stop worrying about it. [[{“value”:”

Most commentary about the stock market boils down to one big idea: “Sometimes stocks go up, and sometimes stocks go down.” The day-to-day volatility (ups and downs) of the stock market is what makes it risky, but in the long run, the stock market is often the best place to put your investment dollars.

Many people worry about the daily ups and downs of the stock market. They wonder if now is the right time to put money into the stock market, or if they should wait a few months until stock prices get cheaper. They fret about when to buy or sell a certain stock, and how much of it to consider.

As for me, I’ve (largely) managed to avoid these day-to-day worries about the stock market. I’m a long-term investor, I don’t time the market, and I don’t buy individual stocks. I’m lucky to earn a good enough living and have enough cash in my emergency fund that I don’t have to make big bets on any one company’s stock or worry about the results of any one day on Wall Street.

But the biggest lesson I’ve learned in my life about how to stop worrying about stock prices happened in 2020 — during the early days of the pandemic.

Feb. 2020 — the Great COVID Crash

Everyone’s tired of talking about the pandemic, but it’s worth reminding everyone of what life was like in February 2020. Ominous new words like “coronavirus” and “quarantine” and “ventilator” were in the headlines. Fear and uncertainty was everywhere. International borders were closing, cruise ships were turning up full of sick passengers, and Americans were stocking up on hand sanitizer and toilet paper.

I’ll never forget how it felt to live through that stressful, surreal, upside-down time. And yet, many people might have forgotten what happened to the stock market that month. Between Feb. 14 and March 20, 2020, the S&P 500 index went down by 31%. No one knew what was going to happen to the global economy, if we were going to have a new Great Depression, if “life as normal” would ever return.

This was the “COVID crash.” We all lived through it. It forged me as an investor — because I didn’t panic. I didn’t sell all my stocks at a loss. At the lowest point of March 20, 2020, I wasn’t worried about the stock market — I was worrying about more important things.

Finding perspective in time of crisis

I didn’t even want to check the value of my retirement savings in March 2020; I didn’t sell stocks, I didn’t panic, I didn’t even look at my IRA account. Instead, I was just trying to do my work and take care of my children (who were suddenly home from school, which at the time seemed like it might be a permanent change).

I still remember how stressed and sad I felt in February and March 2020. I feared for my loved ones’ health and safety. I was obsessively reading the news from all over the world, seeing the latest lockdowns and border closures and case counts, and I felt a huge preemptive wave of grief for all the bad news that was coming our way. I kept thinking about all the families who at that moment were still intact and alive, but who were about to lose loved ones to the virus.

And along with all that, I remember being afraid that the pandemic would wipe us out financially. I was afraid for my favorite restaurants and local small businesses that were being forced to shut down in the face of a bizarre new reality where just “being indoors with people” was somehow the worst thing you could do. I tried to prepare for the possibility that I was about to lose every last dollar in my bank account, that I would lose all my clients and freelance gigs, that my family would be permanently impoverished.

Stocks go up, and stocks go down. But if all the stock markets in the world are crashing at once, if we’re all living through a global crisis, then we’ve all got bigger problems to worry about.

COVID recovery and stock market resilience

And yet…despite the human suffering and many tragic deaths, despite all the millions of lost jobs, the worst-case economic scenarios of the pandemic didn’t come to pass. Human beings found a way to keep collaborating and innovating and investing.

During the rest of 2020, the stock market soared. By Dec. 31, 2020, the S&P 500 index went up about 63% from its March 20, 2020 lows. During the entire pandemic-wracked year of 2020, the S&P 500 gained about 16%.

Stocks go down, and stocks go up. Bad news doesn’t always keep coming forever, and people (and stock markets) find a way to rebuild, adapt, and recover.

How to stop worrying about the stock market

Ever since the COVID Crash, I haven’t worried about the stock market. As a long-term investor, your goal should be to just keep working, earning, saving, and buying stocks as part of a disciplined long-range plan. Crises and crashes will happen; we just have to keep living and investing.

There are always ups and downs as an investor, and sometimes big shocks and disappointments. But over time, in the long run (and sometimes in the short run), the stock market can recover from big losses. That’s why it’s often good to keep buying stocks, even when the market is going down. How consistently you invest is more important than what the stock market does on any given day or year — even on the best, or worst, days and years.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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