Certificates of Deposit or CDs are low risk investments that are ideal for the conservative, moderate or aggressive investor. A CD is similar to a bank deposit, the money is secure and the return is definite. The variation is that a CD is issued for a fixed term, and the interest rate on this time deposit is also predetermined, fixed and higher than that on a regular savings account.

Certificates of Deposit may be issued by entities like banking establishments, credit unions and thrift or savings associations for a time period varying from one month to as long as 20 years. The interest generated within the stipulated time frame may be returned to the investor in periodic installments made monthly, quarterly or semi-annually. Furthermore, CDs may be issued with various coupon structures, a few of which may be callable.

Some bank CDs may also be underwritten by broker-dealers and bought and sold prior to maturity (possibly at a lower price) by individual and institutional investors. These CDs are commonly termed brokered CDs and nearly always carry an estate feature. CDs issued by banks and brokered CDs are insured by complex rules of the FDIC, which is the Federal Deposit Insurance Corporation. CDs typically necessitate a minimum deposit of at least $1,000 and FDIC insurance currently provides protection up to a maximum amount of $100,000.

Certificates of Deposit are a great financial alternative, and are a smart investment, ensuring safety of principal, competitive rates, offered with a variety choices, features and maturities for nearly every investor. CDs form an essential component of any financial portfolio and facilitate the pursuing and realization of investment needs and goals. The following section will discuss in greater detail the types of CDs, issuers, Federal insurance, and tips for investors.