If you’re seeking income, Edward Jones offers a variety of options that may fit your needs, including corporate bonds and certificates of deposit (CDs). While these two products have some similarities, they also have some key differences.
Corporate bonds vs. CDs
| How are they the same? |
|---|
Taxable income |
| Maturity date Both have a defined maturity date when principal is repaid. These funds can then be reinvested or used to pay for an expected purchase or goal. |
| Liquidity Both can be sold prior to maturity. But keep in mind that prices can fluctuate over time due to various market factors, including interest rate risk, such that when interest rates rise, the prices of bonds can decrease. You may lose principal value and receive more or less than you originally invested if you sell prior to maturity. |
| How are they different? |
|---|
| FDIC insurance CDs are covered by FDIC insurance1 up to applicable limits, while corporate bonds are not insured by the FDIC, are not deposits, and may lose value. This means the risk of failing to make timely interest and principal payments (known as the default risk) is generally lower for CDs than for most corporate bonds. As a result, you may be able to hold CDs in larger amounts than corporate bonds. |
| Maturity length CDs are typically available with short- or intermediate-term maturities of up to 10 years. Corporate bonds are offered with maturities of up to 30 years. |
| Issuer type Only banks can issue CDs, while companies in any sector – including financial services, industrials and utilities – can issue corporate bonds. If you plan to own primarily corporate bonds, be sure to diversify by sector. |
Stocks have performed well over the past few years, and they may represent a larger portion of your portfolio than you intended. You may need to rebalance to the mix of stocks and fixed-income investments that’s right for you, and CDs or corporate bonds may be an appropriate solution. Start by getting in touch with your Edward Jones financial advisor today.
