Stocks Vs CDs PDF Print E-mail
Written by Shaun Rosenberg   
Saturday, 31 July 2010 11:29
There are a few different types of investments out there. But two very common ones are stocks and CD's. Each one offers its own solution to saving and investing money, but they are completely difference.
by ShaunRosenberg


There are a few different types of investments out there. But two very common ones are stocks and CD's. Each one offers its own solution to saving and investing money, but they are completely difference.

First of all, what is a CD? CDs are simply investments that banks offer. With a CD you can invest your money into a bank where they will pay you an agreed upon annual return, usually between 1-4%. Once you have invested your money it will stay invested for a set amount of time if you want to get the full return.

This is considered to be a great way to safely keep up with inflation, but that is all it does, it does not help to grow your wealth only to maintain it. There is another problem to using this strategy to invest your money.

Not many people seem to question why banks would be willing to do this. Isn't there a reason behind it? Well yes there is and that reason is that they also invest money.

A bank will take the money that is invested into them through CDs and reinvest it into things like fundamentally strong dividend paying stocks and give out loans which can both give them much higher returns then what they are paying out.

Although these investments do have some risk in them, you cannot invest into the stock market and get a 100% guarenteed return off of your investment. However they have so much potential that paying out a 1-4% interest for the opportunity to invest into them is almost nothing.

Some investors have decided not to invest into things such as CDs and instead fo strait to the meat that comes from things such as the stock market which has the potential to give them a much higher return.

Stocks are basically a small percentage of a company. If you pick the right companies to invest into then it has the potential to make an extremely massive return and definitely can grow your wealth.

So, should you switch out from CDs to stocks? Well, stocks definitely have more potential. But CDs are also safer. If you have a long time to invest then you will find more opportunities by studying the market and making your own decisions.

If you are keeping that money as more of a safety net and just want it to be safe, then CDs can work pretty nice. It is at least better then saving your money under your bed where it does not even match inflation. So, they are two different investments that work best in two different ways.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

For some stock market tips and more information on the stock market visit Shaun's site about the stock market basics Unique version for reprint here: Stocks Vs CDs.