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Certificates of deposit
How they're valued: Certificates of deposit, or CDs, are federally insured time deposits with specific maturity dates that can range from several weeks to several years. Because these are "time deposits," you cannot withdraw the money for a specified period of time without penalty. The financial institution pays you interest at regular intervals. Once the CD matures, you get your original principal back plus any accrued interest. There are several different types, including jumbo, callable and flexible CDs
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Risk: CDs are considered safe investments. However, they do carry reinvestment risk -- the risk that when interest rates fall, investors will earn less when they reinvest principal and interest in new CDs with lower rates.
Consider laddering CDs -- investing money in CDs of varying terms -- so that all your money isn't tied up in one instrument for a long time. Although CD returns often are higher than those of traditional savings accounts, it's important to note that inflation and taxes could significantly erode the purchasing power of your money.
Liquidity: CDs aren't as liquid as savings accounts or money market accounts because you tie up your money until the CD reaches maturity -- often for months or years. It's possible to get at your money sooner, but generally you'll pay a penalty.