The offers and details on this page may have updated or changed since the time of publication. See our article on Business Insider for current information.
Affiliate links for the products on this page are from partners that compensate us and terms apply to offers listed (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate products and services to help you make smart decisions with your money.
Jen Glantz
One of my biggest goals in recent years has been working on the state of my finances — especially what risks I'm taking. Over the past few years, I've infused too much risk into my financial portfolio, investing in individual stocks and cryptocurrency, and faced steep losses. I wanted this year to be a time when I rebuilt my overall net worth and grew my finances back to where they were before I made bad trades in the market.
At the start of the year, I asked a financially savvy friend of mine to eyeball my portfolio. One of the biggest pieces of feedback he had was to move two-thirds of the cash I have sitting in my savings account into a 1-year CD with a 5% APY.
I decided to follow his advice. Here are three reasons why doing that was the best financial decision I've made in a while.
See the best CD rates »
Since my financial goal this year was all about growing my net worth, I decided that locking up ⅔ of my available cash into a 12-month CD, rather than investing it in an index fund or in individual stocks, was a smart move. That's because CDs are low-risk savings tools that are FDIC-insured, up to $250,000.
When the CD matures in a year, I'll get my 5% guaranteed payout. After two years of making bad investments and losing money, it's felt nice knowing that my money is sitting in an account that is extremely low-risk.
Before 2020, I never even had a brokerage account or invested my money anywhere. But when I started buying individual stocks and cryptocurrencies, I spent lots of time researching as much as possible to try and make educated decisions. After a few months of dedicating two to three hours a day to my investment portfolio, I realized that this wasn't sustainable.
The time I was spending researching the best stocks or cryptocurrency to buy wasn't helping me yield good returns. I lost a few hundred dollars over the course of a week just making trades I thought were a good idea to make.
Because I was a rookie investor with no real knowledge or experience, I decided that I needed to stop playing around with the stock market and crossing my fingers that the cryptocurrency I was buying would one day lead to a big payoff.
Instead, I wanted to spend a few years rebuilding my net worth by sticking my cash in a CD that didn't require any ongoing attention. I could leave my money in there without having to worry that my lack of experience or knowledge would interfere with the outcome.
While I do have some of my money invested in a SEP IRA retirement account and index funds, I wanted to grow a big chunk of my money as much as possible in a short-term time frame.
It seemed like the only guaranteed way to do that was to put the cash in a CD that offered 5% APY after 12 months. If I put the money in the market, there would be no guarantee of what my yearly return would be. And if I put the money in a high-yield savings account, the amount I'd earn at the end of the year would be variable.
A CD is a risk-free option to turn to in order to get the best possible return on the money in a short timeframe — I'm glad it's the choice I went with.
This article was originally published in October 2023.
