Certificate Of Deposit

Understanding Investment Risk

Certificates of Deposit (CDs) are widely regarded as one of the safest investment options available due to two key factors:

• They offer a fixed and guaranteed interest rate.
• CD investments are backed by federal insurance provided by the FDIC for banks and the NCUA for credit unions.

Understanding these factors helps investors manage their portfolios effectively, aligning investments with financial goals and risk tolerance.

Why Choose to Open a CD?

CDs provide fixed and secure interest rates, typically backed by federal insurance, which can be higher than those offered by other types of bank accounts. Moreover, longer-term commitments often yield higher CD rates. For savers seeking higher returns than traditional savings, checking, or money market accounts offer, CDs present an appealing option with lower market risk and volatility.

Key Terms and Our Definition of Certificate of Deposit (CD) Investing at VEO Investment

What is a Certificate of Deposit (CD)?

A certificate of deposit (CD) operates like a savings account but with a fixed interest rate for a specified period. Typically, CD rates are higher than those of savings accounts, but they come with limited withdrawal flexibility. Early withdrawal of CD funds incurs a penalty charge.

How Certificates of Deposit (CDs) Work at VEO Investment

Opening a CD at VEO Investment is straightforward, much like opening a standard bank deposit account. When considering which CD(s) to open, there are four key factors to weigh:

• Interest rate: Most CDs offer fixed interest rates, though there are variable-rate options that could yield higher returns if rates increase.
• Term: This refers to the duration you agree to keep your funds deposited to avoid penalties (e.g., 6-month CDs, 1-year CDs, 18-month CDs, etc.).
• Principal: This is the initial amount you deposit when opening the CD.
• Financial institution: The bank or credit union where you open your CD determines factors like early withdrawal penalties (EWPs).

Once your CD is funded, VEO Investment manages it like any other deposit account. You’ll receive regular statements—either monthly or quarterly—via paper or electronically, with interest payments typically deposited into your CD balance, where they compound over time.

Certificates of Deposit Investment Strategies We Adopt at VEO Investment

Laddering

This strategy involves dividing your investment across multiple CDs with staggered maturity dates, such as 1-year, 2-year, and 3-year terms. As each CD matures, you can reinvest the funds into a new CD with a longer term, potentially earning higher interest rates while maintaining liquidity.

Barbells

In a barbell strategy, you invest in both short-term and long-term CDs, avoiding intermediate terms. This approach allows you to benefit from higher interest rates on long-term CDs while having flexibility with short-term CDs.

Bullets

Bullets involve investing in a single CD with a specific maturity date. This straightforward approach suits investors seeking predictability and a fixed return at a designated time.

Callable CDs

Callable CDs give the issuing bank the option to recall the CD before its maturity date, usually after a specified period. While they may offer higher interest rates, callable CDs carry the risk of early redemption, affecting your investment strategy.

Brokered CDs

These CDs are purchased through brokerage firms rather than directly from banks. They may offer higher interest rates or access to a broader range of issuers, but they can also involve higher fees and complexities.

Step-Up CDs

Step-up CDs feature interest rates that increase at scheduled intervals during the CD’s term. This strategy allows you to benefit from rising interest rates over time while enjoying the stability of a fixed-income investment.

Our Approaches to Certificates of Deposit Investment

Strategic Allocation

We strategically allocate funds across CDs with varying terms and interest rates to optimize returns while managing liquidity needs.

Risk Management

Our investment strategy includes thorough risk assessment, considering factors such as early withdrawal penalties and callable CD risks.

Diversification

We emphasize diversification by spreading investments across multiple CDs from different institutions and with different maturity dates.

Market Monitoring

Our team continuously monitors market conditions and interest rate trends. This proactive approach allows us to adjust our CD investment strategies accordingly.

Client-Centric Approach

We prioritize understanding our clients’ financial goals, risk tolerance, and liquidity requirements. By aligning our CD investment strategies with their specific needs, we aim to deliver personalized investment solutions that support their long-term financial objectives.

By following these approaches, VEO Investment ensures that our CD investment strategies are well-rounded, tailored, and aligned with our clients’ best interests, fostering confidence and delivering value over the long term.