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Risk versus reward

By Sheyna Steiner ·
Thursday, August 18, 2011
Posted: 7 am ET

Today's CD buyers are stuck between a rock and a hard place. FDIC-insured CDs are one of the safest investments around -- but they're also one of the lowest yielding.

After last week's crazy swings in the stock market, the trade-off between safety and yield could seem reasonable to some people. With much more economic uncertainty ahead of us, peace of mind might be worth some missed opportunities.

However, there may be investments that come with fewer opportunity costs. According to Bankrate's weekly rate survey, the "Interest Rate Roundup," the average five-year CD yield is currently 1.45 percent. With core inflation currently measured at 1.8 percent as of July, money put into CDs today will lose purchasing power over time.

For a little bit more risk, investors can keep up with inflation or, ideally, do even better. To learn about alternatives to certificates of deposit read the Bankrate feature, "Fixed income alternatives for retirees," or "4 low-risk inflation strategies."

Still sold on CDs? There are some relatively decent yields out there.  Search for CDs locally and nationally on Bankrate's CD rate tables.

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