This New Investment Option Could Be a CD Killer

The best CDs are paying 5.00% APY (or higher) right now. But I'm still not impressed. Putting your money into a CD brings a few big drawbacks. Yes, you get a fixed rate of interest on your savings, but you have to lock up your money for a fixed amount of time. And if you need to pull your deposits out of the CD earlier than you'd expected, you can get hit with early withdrawal penalties.

There's a new kind of investment account that recently came onto the market from Save (joinsave.com), a fintech company that helps people earn higher yield on their savings. If you're willing to commit your money to a 1-year term (or longer) with a CD, you should consider joining Save.

This unique option for your investments can give you the safety of the best CDs, but with a higher potential return on investment (ROI). The Save Market Savings program and other investment options from Save could be a "CD killer" -- making people re-evaluate whether they really need CDs as part of their investment strategy.

Let's look at a few reasons why you should consider Save's innovative options as an alternative to CDs.

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SoFi Checking and Savings APY up to 4.60% Rate info You can earn the maximum APY by having Direct Deposit (no minimum amount required) or by making $5,000 or more in Qualifying Deposits every 30 days. See SoFi Checking and Savings rate sheet at: https://www.sofi.com/legal/banking-rate-sheet. Min. to earn $0 Open Account for SoFi Checking and Savings Member FDIC.	APY up to 4.60% Rate info You can earn the maximum APY by having Direct Deposit (no minimum amount required) or by making $5,000 or more in Qualifying Deposits every 30 days. See SoFi Checking and Savings rate sheet at: https://www.sofi.com/legal/banking-rate-sheet.	Min. to earn $0
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How Save's Market Savings program compares to a 1-year CD

Save is not a bank, it's a fintech company and a registered financial advisor. When you sign up for a Save Market Savings program, you put your cash into a deposit account with Save's partner bank, Webster Bank N.A., and you agree to commit your money for a 1-year investment term (kind of like a 1-year CD term).

Save then replaces traditional savings account interest with investments in a portfolio of stocks, bonds, and other assets (with your permission and guidance). You don't have to pick stocks or buy ETFs as part of your Save Market Savings program. 

Instead, Save serves as your fiduciary financial advisor. You get the safety of FDIC-insured bank deposits, but instead of earning interest, you can potentially get higher earnings from market investments. 

As a Save customer, your deposits are never at risk -- that money is protected by FDIC insurance just like any other typical bank account. But Save can accelerate the growth of your savings. Instead of settling for the best CD rates of 5.00% or so, Save has recently achieved annual returns of 9.07% variable APY for the Market Savings program. (Note: this 9.07% variable APY is based on historical returns in Save's S&P 500 Risk Controlled Portfolio, 2009 to present.)

Why choose the Save Market Savings program instead of a CD: If you're willing to commit your cash for a one-year period, if you are confident that this is not "emergency cash" that you might need tomorrow, then the Save Market Savings program could be a better choice than even the best 1-year CDs.

Keep in mind that Save's Market Savings program APY is not guaranteed. Your savings' return with this account is variable based on investment performance. But if you're willing to invest a wider range of your cash, you might get higher returns.

See how Save Market+ compares to the best 3-year CDs

If you're ready to commit your cash for a longer investment term, Save recently launched a new investment product called Market+. This account keeps you invested for a three-year timeframe, and you get a guaranteed annual return of up to 4.20% APY -- plus the possibility of additional variable return based on investment performance. 

Based on Save's hypothetical backtesting, the Market+ program could earn a total of 8.20% APY -- combining 4.20% guaranteed annual return, and 4.00% average variable market linked return.

Want more growth potential, but less guaranteed return? Save Market+ also offers the choice of 3.00% guaranteed annual return with 6.65% average variable annual return -- so you could get a combined total average annual return of 9.65%.

Why choose the Save Market+ program instead of a 3-year CD: The best 3-year CDs are paying 4.00% APY or higher today. Save Market+ gives you a similar level of guaranteed annual return, but with higher potential for growth. If you can afford to leave your cash alone for three years, why not give it a chance to grow even more?

Keep in mind that the 4.00% or 6.65% variable return portion of Market+ is not guaranteed. If the stock market does not perform well, you might not gain that much. But your principal is protected by Save's principal guarantee if you hold the investment for the full three years, and you will receive at least 3.00% or 4.20% annual guaranteed return based on your choice of Market+ investment program.

Bottom line: Why choose Save instead of a CD

Save's investment accounts are not right for every saver or investor. If you are not sure that you can leave your money invested for the full one-year or three-year investment term, you might want to choose a high-yield savings account instead. Save requires minimum deposit amounts and charges advisory fees that equal a small percentage of the total money being managed for you (these fees are competitive with the best robo-advisors.)

But anyone who's willing to open a CD and risk incurring early withdrawal penalties should look at Save's investment programs as intriguing new CD alternatives. If you can leave your cash alone in a CD for one year or three years, why not try to earn a higher yield? Instead of being limited by the strict rules and fixed APYs of CDs, Save is giving people powerful new ways to invest their cash.