Bonds vs CDs

You're emotion
Running cold running warm
The young just getting older
--Dio

Article considers whether fixed income investors are better off with CDs rather than bonds. As shown below, CD yields are surprisingly close to bonds of similar duration.

Bonds have generally been favored for their liquidity and their capital appreciation potential if interest rates fall. On the other hand, bond investors are exposed if interest rates rise (as many have learned recently). Bonds also carry risk of principal fluctuation and defaults.

CDs are FDIC insured. And interest rate exposure can be hedged by 'laddering' CDs of various duration as discussed in the article.

For my money (literally), CDs are my preferred vehicle for fixed income purposes.

position in CDs