Yogi
Lv 7
Yogi asked in Business & FinanceInvesting · 9 years ago

Which is better to have?

one big CD that draws 26% or three smaller one that each pulls 26%.

6 Answers

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  • 9 years ago
    Favorite Answer

    I disagree with John W. There is usually a penalty on early withdrawal, so its better to have 3 little ones than one big one. 3 little ones give you more liquidity if you need to take money out.

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  • John W
    Lv 7
    9 years ago

    A CD is essentially a fixed term savings account and therefore the deposit is insured through FDIC. Given that guarantee against loss, there is no need to diversify for risk. Of course a CD would typically net you 1% to 3% these days not 26%.

    I would guess that you are relatively ignorant about investments and are simply asking if a single large investment is better than three smaller investments with the same returns and risks. The answer is that the three individual investments would be better because with most investments, there is always the risk of loss and by diversifying across three investments, you greatly reduce the probability of losing everything.

    But a CD is considered a risk free investment in that there is no chance of a total loss, even if the organization underwriting the insurance should default, the insurance industry is regulated such that the other organizations will cover and FDIC is federal so the government itself would have to be in serious jeopardy for FDIC to default. By asking if one big CD is preferable to three smaller CD's instead of asking if one big investment is preferable to three smaller investments, you've made your question non-sensical.

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  • 9 years ago

    one big CD that draws 26%

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  • 9 years ago

    the one bigger one. do the math.

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  • 9 years ago

    i don't know it which is better

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  • ZxssxZ
    Lv 5
    9 years ago

    none

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