What is the difference between a bond and a CD?

Bonds also expose investors to both interest rate risk (how a bond’s value responds to a rise or fall in interest rates) and credit risk (the issuer’s creditworthiness). In contrast, CDs have little risk to the principal. Rates. CDs may offer slightly higher annual percentage yields (APYs) than a typical savings account.

Should you buy a CD or a bond?

In some situations, CDs may be the better choice for shorter-term goals, while bonds may be part of a longer-term strategy. CDs don’t increase in value as bonds could when interest rates fall, although CDs would pay the established higher interest rate for the duration of their term.

How do I choose between CDs and bonds?

Knowing how to choose between CDs or bonds requires the investor to understand both the investments and his or her requirements. A certificate of deposit, or CD, is a type of investment product typically offered by a bank or credit union. Investment firms also offer brokered CDs that can be purchased though an investment account.