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"CDs or Bonds - Stash Cash or Look for Higher Potential Returns?"

While 2022 brought us higher inflation, market volatility and investor anxiety, it also generated something positive: higher yields for those looking to put cash to work, whether in bank certificates of deposit (CDs) or in fixed-income investments such as bond mutual funds. This article discusses whether investors may want to stash their cash or find a potentially more productive way to put it to work.

Although it’s true that CD yields have risen sharply in recent months, it’s worth considering that the potential loss of principal from investing in bonds isn’t the only type of risk involved in trying to generate income from savings. With CDs, there’s the potential that the rates they pay may have peaked—and they could fail to keep up with inflation. In contrast, bond yields adjust with market conditions. This article discusses how, in the vast majority of instances, mutual funds that hold portfolios of bonds have historically generated greater inflation-adjusted growth than CDs in periods after CD rates have peaked. Topics covered include:

• How CDs work
• Benefits and drawbacks of certificates of deposit
• 6 historical examples of inflation's damaging impact on CD returns
• Bond funds and other certificate of deposit alternatives for putting cash to work
• Comparing certificates of deposit versus bond funds today

MF2880974,  5/23

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