Does the rough start to 2014 in the stock market have you craving more stability in your investment portfolio? If so, consider bank certificates of deposit. Ally Bank’s Raise Your Rate CD is one option that provides safety by allowing the holder the ability to raise the rate, if the rates increase for this CD. This allows the rate to increase without the feeling of being stuck at a low rate. If our rate increases during the term of either the 2-year or 4-year Raise Your Rate CD, you are able to take advantage of that rate increase for your CD.
“As the Federal Reserve dials back their stimulus and with interest rates expected to start moving higher, investors will increasingly look to CDs that give them the opportunity to benefit from rising rates,” says Greg McBride, chief financial analyst with Bankrate.com.
Rising interest rates, which can slow the economy, are sometimes seen as a negative for stocks. While that is bad news for your 401(k) balance, it’s positive news for savers who want the safety and security of FDIC Insurance.
Bump Up For Better Returns
While traditional CDs have one set rate, bump-up CDs provide account holders the ability to raise their CDs rate when they increase during the CD term, which is an added benefit, especially for longer term CDs.
“Investors like CDs that give them the ability to benefit as interest rates rise. This helps overcome the common objection about tying money up in a CD to only see the interest rates move higher after they’ve been locked-in to the CD rate,” says McBride.
The Raise Your Rate CD allows you to stay in the same CD and get a higher rate. You can raise your rate once with a 2-year term CD and twice with a 4-year term CD, if our rate goes on these CDs. Plus, you grow your money faster by compounding interest daily – giving better returns on savings.
When to Raise Your Rate
The ability to increase your earnings potential in the middle of a term can be attractive, but knowing when to exercise that rate increase can be challenging.
McBride says that “maximizing your return on bump-up CDs is as much art as it is science. You need interest rates to rise sufficiently to where it’s worth your while, but still have enough time remaining before maturity to actually benefit from the higher yield you’re pulling in. There’s no magic potion to know the optimal time to increase your rate.”
With the Raise Your Rate CD, you can set up personalized alerts and we will let you know when our rate goes up, so there’s no need to chase rates.
While money in a CD is covered by FDIC insurance, up to the maximum allowed by law, you still need a savvy savings strategy.
Financial experts have long recommended CD laddering as a way to take advantage of higher yields and longer maturities, and increase liquidity by splitting CDs between varying maturities.
Ally Bank CDs typically offer higher interest rates than savings accounts with varying terms to fit your specific savings need. In addition, there is no minimum deposit to open and no monthly maintenance fees.
“Regardless of whether interest rates are high or low, CDs offer valuable stability relative to other investments, and are part of a well-diversified portfolio,” says McBride.
To learn more about Ally CDs and other savings products, visit AllyBank.com.