Bonds vs. CDs: Similarities, major differences, and how to choose - Business Insider

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Bonds vs. CDs: The key differences and how to decide which income-producing option is better for you

An investor's long-term goals, need for cash, and tolerance for risk all play a part in deciding between bonds or CDs.Bonds and CDs are both fixed-interest investments, popular with investors seeking a low-risk income stream.

It's important to know the differences so that you choose the fixed-income investment that best suits your needs. Here's a rundown of the key features of each, and how to opt for one over the other. is a loan that investors make to large entities, like governments or companies. In return for borrowing your money, the bond issuer promises to pay a certain interest rate over a set period of time and to repay the principal when the bond reaches maturity.

Corporate bonds can be riskier than government or municipal bonds, but may also offer more attractive interest rates. To research a bond's degree of risk, you can check its credit grade assigned by credit-rating agencies like Standard and Poor's, Moody's, and Fitch. Like academic grades, they're letters, ranging from A to F. Any bond that gets ranked BBB or above is considered "investment grade."is actually a type of savings account offered by banks.

 

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