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What’s the Difference between CDs (Certificates of Deposit) and Share Certificates? 5 Things to Know

Moneymagpie Team 17th Oct 2023 No Comments

Reading Time: 3 minutes

There are all sorts of investment opportunities out there if you want your money to work for you. CDs and share certificates are two common examples, but what are they and what else do you need to know before choosing either or both?

Understanding the Basics: CDs Vs Share Certificates

To differentiate between CDs (Certificates of Deposit) and share certificates, we need to understand what each one represents.

A CD is a type of savings account that has a fixed interest rate and fixed date of withdrawal, known as its maturity date. Banks issue these types of financial instruments with the promise that you’ll keep your cash deposited for a set term length, and they’re protected by federal insurance up to certain limits.

On the other hand, share certificates represent ownership in a corporation or financial institution. Shareholding gives you rights to dividends declared by the corporation and lets you attend shareholder meetings. Unlike CDs, share certificates expose holders to more risk but also potentially higher returns if the company performs well.

How to Buy Share Certificates

Purchasing share certificates is usually a straightforward process involving a brokerage account. First, you need to open an account with your chosen broker platform. Secondly, once the setup and funding of this account are complete, you can then search for the particular shares you wish to buy.

The final step involves specifying how many shares or what amount of money you want to invest in these shares. Then simply confirm your purchase order and wait for it to be completed.

You can also buy share certificate accounts from federal credit unions, such as Austin Telco. The benefit of Austin Telco share certificates in particular is that they offer a specific rate of interest, so your returns are easier to calculate depending on the product you purchase.

The Pros and Cons of Investing in CDs

As for any investment type, there are upsides and downsides to putting your money into CDs. These include:


  1. Safety: CDs are low-risk investments as they’re backed by FDIC insurance which means you’re guaranteed to get the original deposit back plus any interest earned.
  2. Predictable Returns: Interest rates on CDs are fixed hence you know exactly how much you’ll earn over the term length.


  1. Limited Access to Funds: Your principal is locked until the maturity date; premature withdrawal typically incurs a penalty.
  2. Inflation Risk: If inflation rates rise above your CD’s return, your purchasing power could be eroded.

While investing in CDs results in virtually no risk of loss, this safety comes at the expense of limited accessibility and potential lackluster returns during periods of high inflation.

Evaluating Risk and Return for Share Certificates

Investing in share certificates represents a different paradigm with its own set of rewards and risks compared to CDs:


  1. Higher Potential Returns: If the company performs well, shareholders can enjoy appreciable gains from rising stock prices and dividends.
  2. Ownership Rights: Holders have voting rights at shareholder meetings affecting key decisions.


  1. Market Volatility: Stock prices are subject to market fluctuations that could lead to losses or lower-than-expected returns.
  2. Insolvency Risk: In case of bankruptcy, you may lose your investment entirely.

While the thought of potential higher returns is thrilling, investors need to weigh this properly against market volatility and company-specific risks. The trick lies in assessing these factors before investing so that you’re comfortable with the level of uncertainty tied up with your investments.

Making an Informed Decision: Which is Right for You?

The decision to invest in CDs or share certificates should align with your financial goals, risk tolerance, and investment horizon.

Here are a few considerations:

  1. Safety vs Reward: If the safety of capital is your primary goal, then CDs could be the better option as they’re covered by federal insurance. However, if you aim for higher returns and can tolerate some level of risk, investing in shares might suit you more.
  2. Access to Funds: Needing quick access to invested funds favors CDs as shares liquidation might occur under unfavorable market conditions.
  3. Market Knowledge: Investing wisely in shares requires understanding the company’s operations and performance metrics which could limit investors short on time or research resources.

Your choices should ultimately mirror your personal circumstances allocating wisely based on what makes the most sense for your unique situation.

Final Thoughts

As always, with any financial decision, it’s best to get input from an expert. Finding the right financial advisor is better than going solo, especially if you don’t have the time to do extensive research and comparisons yourself.

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.

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Jasmine Birtles

Your money-making expert. Financial journalist, TV and radio personality.

Jasmine Birtles

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