Is a CD the same as investing?

Is a CD the Same as Investing?

Question: “We are saving for a second home and will not be purchasing one for two years, at least. I went to the bank to open a certificate of deposit with the bulk of the money. I chose the bank because they were a national one and advertised 5% interest on their website. The banker had me talk to someone else at the bank who was an investment advisor. He said, “I cannot recommend a cd to you. In an investment account, you will make more money.” Then, he offered to open an investment account for me. I left because it did not feel right. Should I have opened one?”

All of your money needs to be earmarked for a purpose and invested accordingly. Any money you need long-term – more than eight years can be invested. You probably have a retirement account which is invested for your future. And a safety account in an insured savings. This additional money has a purpose which is not long term. In my financial planning world, any money needed in less than four years is short-term. That five to eight years is for bonds which is a more stable investment than stocks. But you did not ask me about bonds. Your second home money is best insured in a cash account at your bank or credit union. 

Good for you for following your gut. The advice you received at the bank from an investment professional was not in your best interest.