Share Certificates Deliver Predictably Strong Returns

A share certificate is usually more rewarding in returns than a traditional savings account, and less risky than other investment options. Share certificates may be a good fit for investors seeking strong returns without the potential for loss that comes with stocks and bonds. For those new to share certificates, here is a primer on what they are and who might consider one.

Share certificates 101

Unlike a regular savings account, which allows penalty-free withdrawals, a share certificate requires that the money goes untouched until the certificate matures or reaches the end of its term – often from six months to five years. A key advantage of certificates compared with regular savings accounts is that certificates accumulate a predictable, locked-in return in exchange for leaving the funds alone, whereas the interest paid on regular savings can vary.

Like savings accounts, the National Credit Union Administration (NCUA) insures share certificates for up to $250,000. As long as you have more than $500 to invest and are comfortable not having access to the funds for a period of time (or paying penalty fees if you withdraw funds early), a share certificate can be a good way to put money to work.

Who should use share certificates

Share certificates are among the highest-yielding government-backed investment options available. Longer-term investments with larger sums typically provide the most advantageous ways to use share certificates. If an investor needs to withdraw money before the maturity date, penalty fees may apply. If you do not have an emergency fund, investing too much in a share certificate can be risky. For those with only a little cash tucked away, a regular savings account may be a better choice. While these pay lower interest rates, there are generally no withdrawal penalties.

The limited risk makes share certificates an appealing option for financially comfortable and retired investors. For those with the ability to allocate assets across a variety of investments, share certificates provide a high-yield savings product. As investors age, experts advise reducing risk to protect accumulated wealth.

Making the most of your money

Retired and wealthy investors who have more flexibility with funds may consider spreading assets across several share certificates with different maturities, employing a strategy called laddering. As each share certificate comes to term, reinvest the funds in another certificate to maintain a steady stream of interest income.

If commitment to a long-term share certificate is a concern, especially with prospects of interest rates rising in the not-too-distant future, consider a bump-up account, which allows the investor a penalty-free opportunity to raise the interest rate once during an 18-month term, or twice in a 30-month term certificate.

If market conditions make you nervous, relatively risk-free share certificates may make it easier to relax as your savings earn interest.

Visit altaone.org for more information on our term share certificates.

Cait Klein, NerdWallet

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Get Rich Quick

Want to become stinking rich? Of course, you can save your money in an AltaOne account and invest wisely with our various products. Or -- you can try to emulate the habits of the rich. We explored the World Wide Web to find data on what differentiates the wealthy from the not-so-wealthy. Here are some of the more interesting findings:

• The wealthy eat healthy — 70% eat less than 300 junk food calories per day.
• The wealthy set goals — 80% focus on accomplishing some single goal.
• The wealthy stay in shape — 76% exercise aerobically four days a week and 57% pay close attention to their calorie intake.
• The wealthy like to learn — 63% listen to audio books during their commute.
• The wealthy are thoughtful — 80% call their family and friends to wish them a happy birthday.
• The wealthy are goal-oriented — 67% have written goals.
• The wealthy avoid the television — 67% watch one hour or less of TV per day ...

... and they really avoid mindless television — just 6% watch reality TV.

• The wealthy pass on their habit to their offspring — 74% teach their success habits to their children.
• The wealthy are always learning — 86% believe in lifelong educational.
• The wealthy are readers — 86% enjoy a good book on a regular basis.
• The wealthy write down their plans — 81% keep a daily to-do list
• The wealthy like their jobs — only 6% are unhappy because of work.
• The wealthy are realistic — just 6% play the lottery on a regular basis.
• The wealthy floss regularly — 62% do so every day.
• The wealthy are optimistic — 98% believe the American dream is still possible.
• The wealthy are into people — 68% love meeting new people.

Here are a few more ...

• Most wealthy folks do not carry high credit card balances.
• The wealthy save for their seniority, and they usually start saving for retirement when they are young.
• Wealthy people set up automatic savings programs so they do not have to think about plopping money into a savings account.
• Many wealthy folks are early risers, with a high percentage accomplishing more before 8:00 a.m. than many people do all day.

We hope this blog helps to put all our members on a path to their own pot of gold. A good investment advisor may help, as well.

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