Don't Let Jitters Jolt You Into Cashing CD

Dear Dr. Don, If I take $100,000 out of a certificate of deposit that matures in 2014, what is the penalty and how should I invest it -- silver, cigarettes, tissue, coffee, ammunition? My friend took out his savings yesterday to buy silver. I am so confused, I'm widowed and don't know what to do about managing my money.

-- Jumpy Jean

Dear Jean,

Things may look bleak, but they're not so bleak that you have to go into survivalist mode and cash in your CD. The early withdrawal penalty on your CD maturing in 2014 could be substantial. Bankrate's 2010 CD early withdrawal penalty study can give you an idea, but giving your banker a call will let you know the exact penalty. The highest penalty I saw in the Bankrate study was $25 plus 3% of the amount withdrawn, or $3,025 if that was the penalty that applied to your CD.

I make a distinction between savings and investment. With savings, you're more concerned about keeping principal safe than you are in earning a yield. That your friend cashed in his savings to buy silver seems a tad extreme, regardless of how he does in the trade.

Are you a saver or an investor? I think there's room in almost every investor's portfolio for some speculative investments, but that percentage for most of us should be somewhere between 5% and 15% of our portfolio's value and erring on the smaller end of that range for the typical investor makes sense. Does the $100,000 represent 5% of your portfolio?

You didn't explain what gave you the jitters. It could be the low yield on savings. It could be the whole federal budget and debt ceiling debate. Heck, it could even be the outsized returns on silver over the past year.

Check your motivation for why you want to switch from saving to investing this $100,000. Don't decide to swing for the fences by piling your money into what's done well in the recent past because there's no guarantee that these investments will continue to outperform.

Bank CDs also are backed by the Federal Deposit Insurance Corp. up to $250,000, while many investments have no protection.

If you do want to invest, invest some time in finding an investment professional you can trust to help you manage your money. The Bankrate feature on financial planners can help you find that trusted adviser.

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