I’m a Financial Advisor: Why 2024 Is the Year To Invest In CDs

If you invested your money in the stock market, the S&P 500 has offered an average return rate of 10.2% over the past decade. It’s worth pointing out that the returns for 2023 were 26.3% and -18.1% in 2022, so if you pulled out money at the end of 2022, you likely lost a decent amount.

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While there are many different ways to invest your money, you can’t ignore your risk tolerance, as you don’t want to get stressed out when you experience volatility. While one person may benefit from investing in individual stocks, another could be better off placing their funds into safer assets.

According to a financial advisor, why should you consider investing in a CD this year?

Predictable Investment Returns

“CDs offer a stable and predictable return on investment compared to other higher-risk investments,” said Taylor Kovar, CFP, founder and CEO at 11 Financial . “With interest rates expected to remain relatively stable or possibly increase modestly, locking in a CD now allows investors to secure a guaranteed rate of return over a specific term.”

When you invest in the stock market or any other assets, you can’t accurately predict the returns. Looking through any stock chart, you’ll notice dips caused by interest rate announcements, inflation data, and other economic factors. You don’t want to stress about every market swing and its impact on your investments.

“Right now, a CD still provides an attractive return compared to most savings accounts,” said Erika Kullberg, an attorney, personal finance expert and founder of Erika.com . “If you’re willing to part with a certain amount of cash for six months or more, a CD is a great way to earn interest on your holdings this year.”

The predictable and decent investment returns will allow you to plan for your financial goals accordingly.

Adds Stability to Your Portfolio

“Including CDs in a diversified investment portfolio can help mitigate risk,” Kovar noted. “They counterbalance more volatile assets like stocks and bonds, enhancing overall portfolio stability.”

During an uncertain economic climate, you may want to think about adding stability to your portfolio compared to the other investment products available.

“Investing in CDs in 2024 is appealing due to the expected stability in interest rates and the opportunity to lock in competitive rates before any potential future increases.” Kovar elaborated.

This timing allows investors to maximize their returns while minimizing exposure to market volatility and economic uncertainty. You never know how the stock market will react to future inflation data and other economic updates.

Helps Preserve Capital

If you’re close to retirement or don’t want to take on unnecessary risks, you can preserve capital by investing your funds in a CD. Depending on the stage that you’re at, capital preservation could be a key consideration when making investment decisions.

“Through potential market fluctuations and economic uncertainties, CDs provide a safe haven for preserving capital,” Kovar said. “They’re insured by the FDIC (for bank CDs) or NCUA (for credit union CDs) up to certain limits, offering peace of mind against loss.”

Investing In a CD Now Allows You to Lock In Your Interest Rate

“If interest rates rise in 2024 as projected by financial experts, investing in a CD now allows investors to capture higher yields before rates potentially increase further,” Kovar stated. “This can be advantageous for locking in favorable returns over the CD’s term.”

If you invest in a CD right now, you’ll lock in a higher interest rate without worrying about fluctuations. Locking at a higher rate allows you to earn more on your money than leaving your funds sitting in a basic savings account.

“Since you’ve got a fixed rate, a CD also offers a predictable stream of income, especially if you can put away a large amount of cash,” Kullberg said. “This is another advantage in what’s still a bit of an unpredictable economic landscape, and offers a great alternative to more short-term savings accounts with interest rates that could face volatility before this year ends.”

Ideal For Shorter Term Financial Goals

“CDs are ideal for individuals with short- to medium-term financial goals, such as saving for a down payment on a home, funding education expenses, or preparing for anticipated expenses like home renovations,” Kovar said.

When you have short-term goals requiring significant capital, you want to ensure that your funds earn you a decent return without any real risks. With a tighter time horizon for your investment goals, you can’t take on unnecessary risks. CDs could be the ideal investment vehicle for your short-term goals.

If you’re looking to get married, buy your first home, or make any substantial purchases in 2025, you’ll want to be proactive by locking up some of your funds in a CD in 2024 to ensure your money works for you.

This article originally appeared on GOBankingRates.com : I’m a Financial Advisor: Why 2024 Is the Year To Invest In CDs