When you first begin looking at investments one thing to consider is how frequently you plan to add funds to the account.
Some investments are well suited to additional funds being added monthly, quarterly, or yearly whereas others are better suited to single investments that run the term.
One form of investment is certificates of deposit which can be obtained from the majority of leading banks and are backed by the FDIC for up to $250,000 per person, per bank.
Depending on the terms and conditions of the CD you may be able to add additional funds to the account. However, this doesn’t always mean you should.
Like all investments, it’s important to create a diversified portfolio. Diversifying your investments over CD’s specifically is just as important as diversifying your investments over different products such as bonds and stocks.
How To Find Your CDs Terms and Conditions
If you’ve already got some pre-existing certificates of deposit then you’ll want to check the terms and conditions to see if you can add funds to the account.
The terms and conditions should be included with the paperwork you received (often by mail) when purchasing the CD. If you’ve lost these terms and conditions then you’ll need to contact the bank either online, in person, or over the phone.
The bank advisors should be able to access the CD’s on your account to check the terms and conditions for you (and reissue the paperwork should it be required)
As you can hold multiple CDs with multiple different banks I suggest using a piece of budgeting or investment tracking software to note what CDs are held where.
This will also help you to either release or renew the funds inside the CD once it’s fully matured and help you to ensure that you don’t go over the FDIC cap of $250,000 of insured CDs from each bank.
I personally track mine and keep a note in my calendar for when the term is due to ensure I can research to find the best interest for the next CD investment as I’ve found that roll-over CD investments are usually at a lower rate.
Things To Consider Before Adding Funds To Your Pre-Exsisting CD
Just because the terms and conditions of your certificate of deposit permits you to add funds to the account doesn’t mean it’s a good idea.
Your money is only at risk when invested in a CD if you’ve invested more than $250,000 in one account with one bank. If you have more than $250,000 in CD’s you’re advised to split the money across multiple banks to achieve protection from the FDIC.
Therefore you’ll want to avoid adding any funds to a CD which has $250,000 with one bank. However, this isn’t the only reason you may not want to add funds to your pre-existing CD.
Depending on when you first took out the certificate of deposit interest rates may have changed for the better. Therefore new CD’s may offer a better interest rate (and therefore ROI) than the pre-exsisting CDs you have.
I’d, therefore, suggest checking multiple CD interest rates (as well as term length, and terms and conditions) across multiple banks to see how they compare with the rates of your current CD.
If you are unsure as to how to perform regular investments you should speak to a licenced financial advisor (I am not a licenced financial advisor) who will be able to advise you on suitable products for your personal circumstances.