Certificates of Deposit
A certificate of deposit (CD) is a savings account that holds a fixed amount of money for a fixed period of time, such as six months, one year, or five years, and in exchange, the issuing bank pays interest. When you cash in or redeem your CD, you receive the money you originally invested plus any interest. Certificates of deposit are considered to be one of the safest savings options. A CD bought through a federally insured bank is insured up to $250,000. The $250,000 insurance covers all accounts in your name at the same bank, not each CD or account you have at the bank.
As with all investments, there are benefits and risks associated with CDs. The disclosure statement should outline the interest rate on the CD and say if the rate is fixed or variable. It also should state when the bank pays interest on the CD, for example, monthly or semi-annually, and whether the interest payment will be made by check or by an electronic transfer of funds. The maturity date should be clearly stated, as should any penalties for the “early withdrawal” of the money in the CD. The risk with CDs is the risk that inflation will grow faster than your money, and lower your real returns over time.
Broker Certificates of Deposit
Although most CDs are purchased directly from banks, many brokerage firms and independent salespeople also offer CDs. These individuals and entities, known as “deposit brokers,” can sometimes negotiate a higher rate of interest for a CD by promising to bring a certain amount of deposits to the institution. The deposit broker can then offer these “brokered CDs” to their customers.
Thoroughly check out the background of the issuer or deposit broker to ensure that the CD is from a reputable institution. Deposit brokers are not licensed or certified, and no state or federal agency approves them.
Commodity futures contracts are an agreement to buy or sell a specific quantity of a commodity at a specified price on a particular date in the future. Metals, grains, and other food, as well as financial instruments, including U.S. and foreign currencies, are traded in the futures market. With limited exceptions, trading in futures contracts must be executed on the floor of a commodity exchange. Exchange-traded commodity futures and options provide traders with contracts of a set unit size, a fixed expiration date, and centralized clearing. In centralized clearing, a clearing corporation acts as a single counter party to every transaction and guarantees the completion and credit worthiness of all transactions.
Anyone who trades futures with the public or gives advice about futures trading must be registered with the National Futures Association (NFA). Before investing in commodity futures, check that the individual and firm are registered. The SEC does not regulate commodity futures. The Commodity Futures Trading Commission (CFTC) is the federal agency that regulates futures trading. The CFTC cautions investors to be wary of offers for high yield investment opportunities in futures, options, or foreign exchange, also called forex. These are common areas of fraud.
Additional information can be found at investor.gov