3 reasons I moved more than half of my cash into a 12-month CD with a 5% APY

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• I'm trying to reduce the risk I'm making with my finances — and a CD is a good way to do that.
• I used to spend hours a day researching the markets, and I still found myself losing money.
• With a 12-month CD, I know exactly how much money I'll get back in a year.
• Earn 5.30% APY with a Forbright Growth Savings.

One of my biggest goals in recent years has been working on the state of my finances — especially what risks I'm taking. Over the past few years, I've infused too much risk into my financial portfolio, investing in individual stocks and cryptocurrency, and faced steep losses. I wanted this year to be a time when I rebuilt my overall net worth and grew my finances back to where they were before I made bad trades in the market.

At the start of the year, I asked a financially savvy friend of mine to eyeball my portfolio. One of the biggest pieces of feedback he had was to move two-thirds of the cash I have sitting in my savings account into a 1-year CD with a 5% APY.

I decided to follow his advice. Here are three reasons why doing that was the best financial decision I've made in a while.

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1. It's not a risky choice

Since my financial goal this year was all about growing my net worth, I decided that locking up ⅔ of my available cash into a 12-month CD, rather than investing it in an index fund or in individual stocks, was a smart move. That's because CDs are low-risk savings tools that are FDIC-insured, up to $250,000.

When the CD matures in a year, I'll get my 5% guaranteed payout. After two years of making bad investments and losing money, it's felt nice knowing that my money is sitting in an account that is extremely low-risk.

2. It required no attention or knowledge

Before 2020, I never even had a brokerage account or invested my money anywhere. But when I started buying individual stocks and cryptocurrencies, I spent lots of time researching as much as possible to try and make educated decisions. After a few months of dedicating two to three hours a day to my investment portfolio, I realized that this wasn't sustainable.

The time I was spending researching the best stocks or cryptocurrency to buy wasn't helping me yield good returns. I lost a few hundred dollars over the course of a week just making trades I thought were a good idea to make.

Because I was a rookie investor with no real knowledge or experience, I decided that I needed to stop playing around with the stock market and crossing my fingers that the cryptocurrency I was buying would one day lead to a big payoff.

Instead, I wanted to spend a few years rebuilding my net worth by sticking my cash in a CD that didn't require any ongoing attention. I could leave my money in there without having to worry that my lack of experience or knowledge would interfere with the outcome.

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3. I know exactly what return I'll get

While I do have some of my money invested in a SEP IRA retirement account and index funds, I wanted to grow a big chunk of my money as much as possible in a short-term time frame.

It seemed like the only guaranteed way to do that was to put the cash in a CD that offered 5% APY after 12 months. If I put the money in the market, there would be no guarantee of what my yearly return would be. And if I put the money in a high-yield savings account, the amount I'd earn at the end of the year would be variable.

A CD is a risk-free option to turn to in order to get the best possible return on the money in a short timeframe — I'm glad it's the choice I went with.

This article was originally published in October 2023.

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