$100 Invested in a High Yield 12-Month CD

Investment Idea: $100 invested in a high yield 12-Month certificate of deposit from Ally Bank.

Total Investment: $100

Total Time Cost: 00:15:00

Extra Costs: $0

Total Time Spent on Investment: Ten minutes of research finding the best certificate of deposit price. Ten minutes creating an Ally bank account. Five days for the account to become credited and the certificate of deposit to be funded.

Research and Preparation:
You might be a red neck if you think investing in CD’s means buying five limited edition Garth Brooks Christmas Special CD sets.

However, a CD in the financial sense actually stands for “certificate of deposit” and investing in a CD actually means buying a certificate of deposit from a financial institution with a guarantee that they will pay you a set amount of interest and your initial amount back to you after a certain period of time. Also, CD’s issued by federally insured banks are insured up to $250,000, making them one of the safest, but lowest earning investments in the market.

You might be a red neck if you think buying a Jumbo CD means buying a record. A jumbo CD is actually the term given to a CD which has a very high size: normally a buy price of $100,000 or more. The larger the amount the CD is, the higher likelihood a bank will offer you a better rate on the CD. In my case, I have the opposite of a Jumbo CD. I have what we would call a “mini-CD” (Not an actual finance term) since my investment is only for $100.

In order to find the best price for a certificate of deposit their are some great tools but perhaps the best would be BankRate.com. BankRate offers lots of current up to the minute rates being offered across the country and lets you search them too. They have rates for mortgages, home equity, auto loans, credit cards, and lastly and most importantly for us common CD rates.

So I went ahead and clicked CD Rates.

CD Rates section of BankRate
(CD rates section of BankRate.com)
BankRate then displayed the most common CD rates from around the US in a nice table, and allows you to sort by Institution, APY (Annual Percentage Yield), Rate, Min Deposit, and Comments. I sorted the table by minimum deposit, and only one bank offered a CD which had no minimum deposit.

CD Rates Ally Bank
(Ally Bank had the only no minimum deposit CD’s)
As you can see, not only was Ally Bank the only bank that would allow me to purchase a CD for just a $100, it was also the bank offering one of, if not the highest, APY’s. APY stands for Annual Percentage Yield, and is the amount of return you should expect after a year. I should expect my $100 investment to return $1.02 for the year. It would achieve this amount by earning a rate of 1.01% that is compounded daily yielding a total return of 1.02%. When buying CD’s and making other investments it is always important to check the compounding rate. The difference on the return between an investment that compounds daily, quarterly, or yearly can be huge.

Knowing that Ally bank was the only bank I could even open a $100 CD at and the fact that it’s rate was the highest made it a no-brainer for me to go ahead an open an online banking account with it. (Click here to read about how to open an online Ally Bank account)

Ally CD Opened
(Ally Bank $100 CD)
The process of opening the Ally account was relatively easy. Unfortunately, it took a couple of days for my deposit from my regular checking account to clear, but on July 25th, the money had finally arrived and the CD went live and has been earning me half pennies daily.

Ally CD Opened
(The CD finally opened and earning interest!)
Reason for Investment:
There are a whole lot of alternative investments out there but there are also some classic investments that every portfolio should include. One of the most common and safest investments out there are CD’s. CD’s are issued by banks and insured by the FDIC for up to $250,000. They offer low returns and normally force the buyer into a locked-in time frame. CD’s are a good place to put money you don’t need for six months or more if you don’t want to put that money in too risky of an investment.

The main reason for this investment was to diversify and add a stable and common investment to my portfolio. CD’s are a very common investment and never reap that big of a return, but at the same time they are a safe place to put your money and earn a couple of pennies on the dollar.

With my Ally one year CD, I am looking to earn $1.02 for the year. You can check this investments current value here!




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