How to Invest in CP/CD? Certificate of Deposit and Commercial Paper Exp
Before explaining the Certificate of Deposit and Commercial Paper, let us get a basic understanding of this concept. We all believe in stories and promises, we all live in this world of dual reality, and for those who think that NO! I don’t believe in stories or promises take out a hundred rupee note from your wallet and on closer observation, you will see mentioned on it “I Promise to pay the bearer the sum of one hundred rupees” Now isn’t that a promise we have been believing for quite some time?
Thank you for reading this post, don't forget to subscribe!Certificate of Deposit and Commercial Paper is just another one of these promises.
What is a Certificate of Deposit (CD)?
A certificate of deposit (CD) is a savings certificate with a fixed maturity date and specified fixed interest rate that can be issued in any denomination aside from minimum investment requirements. A CD restricts access to the funds until the maturity date of the investment. CDs are generally issued by commercial banks and are insured by the Federal Deposit Insurance Corporation.
Investing in CD
- Certificates of deposit are sold by banks, credit unions, and some brokerage houses. Bank rate has a tool that is updated daily and shows some of the best rates available nationally and by local zip code. While interest rates and terms are important, so are early withdrawal penalties, minimum required deposits, and the availability of specialty CDs that might be appropriate.
- The best rates are often available online. An online search will reveal the best rates currently available. In addition to an online search, a check of local newspaper ads may reveal rates, including “specials” that may not be listed online.
What is Commercial Paper?
Commercial paper is an unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts payable and inventories and meeting short-term liabilities. Maturities on commercial paper rarely range longer than 270 days. Commercial paper is usually issued at a discount from face value and reflects prevailing market interest rates. They are instruments of borrowing by Companies for the short term. While well-known and reputed companies can only borrow like this based on their financial strength and rating by an authorized Rating Agency, there is always an element of default of Principal and interest
Investing in CP
- Individuals can buy commercial paper from a broker. However, since the commercial paper is typically traded in a set amount, it takes a substantial investment.
- Retail investors can put money in funds or money market accounts that invest in commercial paper. This allows you to get into the market with a smaller investment, though management fees and active investment costs are likely to dilute the yield.
One other very captivating factor about investing in CP and CD are that they have the least risk potential.
If you are still looking for investing in a CP/CD, wait no more and contact Goodwill at admin@gwcindia.in or at +91 80122 78000. Goodwill is an excellent brokerage that deals with CP and CD, not only do they assist and guide you but also provides you with free seminars and classes to broaden your knowledge base.