Current CD rates and investments

If fluctuating gas prices and an uncertain stock market have you looking for a safer alternative, you may wish to consider certificates of deposit. Busey Bank`s Susan Abbott explains: Q:What`s happening with certificate of deposit interest rates? ·Until recently, CDs offered such low rates of return they hardly seemed worth the bother. ·Now that the Federal Reserve has pushed up short term rates, yields are approaching levels not seen since 2001. ·Long term rates are not rising at the same pace. Most analysts suggest sticking with CDs that mature in less than two years. Having some of your savings in these federally insured investments could offer a safe haven in uncertain times. Q: What are CD rates right now? ·Average 6 month CD locally now pays about 2.42%. The average 60 month CD locally now pays about 4.15%. ·Difference between short- and long-term rates, called the yield curve, is considered a key indicator for the economy. Normally it slopes upward from short-term to long-term rates. The longer you allow a bank to hold your money, the higher interest rate you expect to receive. ·Currently, the curve is somewhat flat, so you may wish to invest in shorter-term CDs so you`re not locked in to low interest rates when the curve normalizes and longer-term rates rise. Q: We hear the term laddering? ·"Laddering" is another technique used to reduce risk when investing in CDs. The strategy is designed to smooth out the peaks and valleys of interest rates by investing in CDs with different maturities. With rates expected to rise, again you may wish to stick with shorter term "rungs" on your laddered portfolio. Other products gaining popularity with rising short-term interest rates are bump-rate CDs and other types of special twists. Q: Are CDs only for the wealthy? It`s a common misconception that you have to have $10,000 or more to invest in CDs. Not true! There are many certificate of deposit products out there for $5,000, $2,500 or even $1,000.