Covid-19 has locked down USA and worst recession has struck the financial markets as well as business in USA. Our people are wondering what to do in that recession, one thing which is advised is to spend your money wisely because we do not know when the financial activities will completely resume. As the Government has lock down the entire USA resulting in the unemployment and business units are all shut so in that current state there is a need of passive income which can shoulder your house budget. After extensive discussion with fellow investors and financial advisors we can safely advise that your saving will generate passive income. So, there are two ways to safely invest which will return back every month the passive amount. The 1st one is to invest in Variable Certificate of Deposit and the 2nd is Fixed Certificate of Deposit.
Variable Certificate of Deposit
A Certificate of Deposit is a product or certificate issued by the bank for certain period of time from 30 days to 5 year. In Certificate of Deposit your cash will be deposited in the bank and bank will use them for their business and Certificate of Deposit will issue in favor of you and will show in your account statement every month. In return the bank will provide interest every month, on the amount deposited. In Variable Certificate of Deposit, the interest return fluctuates because the interest rate is interlinked with certain factors like Treasury bill rate, Consumer Price Index & Prime Rate Index. There are higher chances of risk in Variable Certificate of Deposit, the interest return can go to high level or low level which all depends on the factors described previously. if you want to withdraw some amount in emergency it is better to go for Liquid option, the bank will allow you to withdraw some of the amount but the bank will not permit to withdraw all the amount deposited. So, be advised that if there are any emergency chances in future you should allocate some of the amount in liquid option while filling the form.
Certificate of Deposit are quite safer as compare to stocks, bonds or investing in real state as it is the financial market saying that ‘’Cash is not trash”. Now different banks offer different interest rates and its quite up to your shopping and analysis, that which bank is offering more interest return but it has been observed and verified from the investors that small banks usually provide higher interest returns as they are in dire need of investment funds. Now this is a safe passive income and its motive is not making you rich, rather providing you with a cash flow while you are sitting back on your couch. Certificate of Deposit are guaranteed and safer because Certificate of Deposit are insured by Federal Government but you have to make sure that the bank must have FDIC or NCUA insurance. Another precaution which must be kept in mind while going for Certificate of Deposit is that, do not deposit amount up to $150000 rather split the amount with family like spouse or child and deposit the other part to another bank’s Certificate of Deposit.
Fixed Certificate of Deposit
Now the Fixed Certificate of Deposit is quite simple, you will fix the deposited amount for a certain term which varies from three months to 1 year which can be upgraded to 5 years. The Fixed Certificate of Deposit rate will be fixed over the entire term and will not exceed throughout the term. It will remain fixed at the rate on which the Fixed Certificate of Deposit was issued. Penalty will also be charged if you withdraw your deposited money before the due term. The interest rate of Fixed Certificate of Deposit will remain fixed throughout the term and there is no risk of interest rate reduction or fluctuation, due to the recession or slum in the banking or financial market. Rest of the Fixed Certificate of Deposit are same with that of Variable Certificate of Deposit.
- In Certificate of Deposit the longer the term of Deposit in the bank, the higher the interest rate will be received.
- The higher the amount will be deposited in Certificate of Deposit the more interest return will be yielded.
- The interest rate will be applied by the bank automatically every quarterly or monthly entirely depending upon your choice. The returning interest rate will be showed in your monthly account statement.