Are CDs are good investment during high inflation?

Today we will discuss what to consider, as well as better solutions in the current environment.

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This does not constitute an investment recommendation. Investing involves risk. Past performance is no guarantee of future results. Consult your financial advisor for what is appropriate for you.
Disclosures:

0:00 Intro
0:30 Solutions to beat inflation
1:26 Inflation from 1973 to 1982
1:57 CD rates over time vs inflation
3:50 Baseball can teach us a lot about good investors
4:05 How to take income in a down market
4:26 Cash on hand (even with inflation)…(read more)

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REVEALED: Best Investment During Inflation

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Certificate Deposits (CDs) are a type of investment that has been around for a long time. They are often referred to as time deposits or term deposits and are a low-risk investment option. CDs are particularly attractive to people who prefer predictable returns, as they offer a steady interest rate over a fixed maturity period. However, the question that arises is whether CDs are a good investment during high inflation. Let’s take a closer look.

CDs and Inflation

Inflation refers to the rate at which the price of goods and services in an economy is rising. When inflation is high, the purchasing power of a currency is reduced, and investments that offer a fixed return are at risk. Typically, inflation is measured using the Consumer Price Index (CPI), and higher inflation rates may cause the interest earned on a CD investment to be worth less in the future.

CDs are particularly suited for a low-inflation environment as they provide investors with a low rate of return but come with a fixed interest rate, which means that the interest rate will remain unchanged throughout the CD’s term. The interest payments received are taxable, but the principal investment amount is returned to the investor at the end of the CD term.

When inflation rates are high, investments that pay a fixed rate of return may not keep pace in real terms with the rate of inflation. As a result, the interest payments received would be worth less in the future. The value of money decreases, and CDs become less attractive compared to other investment options, such as equities, that have the potential to generate higher returns, even in a volatile economic environment. This is because equity investments, such as stocks, tend to perform well in times of high inflation.

Investing in CDs during periods of high inflation may not be the best investment option. However, CDs still offer advantages such as guaranteed returns, low volatility, and low risks. They also offer investors who want a safe haven for their investments an opportunity to protect their investment capital. Moreover, for those who prefer stability, CDs remain a useful investment resource.

To conclude, CDs are not an ideal option during high inflation, but they still have a place in a diversified portfolio during periods of economic stability. The availability of CDs encourages savings, and if the inflation rate is low or moderate, a CD is a secure and straightforward investment option. It is always wise to evaluate the current economic situation and identify investments that align with an investor’s preference and risk tolerance level.