Don't Open a 3-Year CD Until You Check Out This New Investment

One of the best reasons to open a CD is when you have a decent-sized amount of cash that you can leave alone for a few years to grow, and you want to get a fixed rate of interest on your money. The best 3-year CDs are paying as much as 4.40% APY today.

Opening a 3-year CD could be an appropriate use of money that you're saving for a medium-term goal, like a down payment on a house, a new car, or a dream vacation. But watch out for early withdrawal penalties. Before you open a CD, you need to have a high level of confidence that you won't have to pull your cash out until the term is up. This is especially important for CDs with longer terms, such as 3-year CDs.

A 4.00% APY (or higher) for three years is a pretty good yield -- but what if you could get even better than that? If you want the possibility of earning an even higher yield on your "medium-term" savings, a fintech company called Save (joinsave.com) recently launched a new hybrid investment product with a three-year investment term, called Market+. This investment offers a potential yield of 9.65% total average annual return.

For savvy investors who can be patient with their cash for a few years, Save's Market+ could deliver better return on investment (ROI) than any 3-year CD. Let's look at how the three-year Market+ investment product from Save works, and why it could be a good way to invest your cash.

What is Market+ from Save?

Save is not a bank, it's a financial advisor that helps people earn a higher yield on their savings. And Save's Market+ is not a CD -- but it offers similar protections as a CD.

CDs offer a fixed rate of yield with no risk of losing your deposits (because of FDIC insurance). In a similar way, Save guarantees your principal with its Market+ three-year investment product -- as long as you leave your cash invested with Save for three years, you will get every dollar back that you put in. And the Save Market+ product offers a choice of 3.00% or 4.20% guaranteed annual return -- much better than the national average for 3-year CDs (1.41% APY as of April 30, 2024).

How Save Market+ is different from 3-year CDs

But here's what makes Save Market+ different from a CD: Save invests some of your money in a professionally managed, diversified portfolio of stock ETFs and other assets. You will always get that fixed annual return of 3.00% or 4.20% (based on your choice of program), no matter what. But because of Save's unique way of structuring this product and managing your money for you, you can get bigger returns on your savings -- by combining "CD-style" fixed returns, with stock market upside.

Save estimates that its investments could earn a variable market-linked rate of return of about 4.00% or 6.65%. (Note: these advertised APYs are based on historical performance of the Save S&P 500 Risk-Controlled Portfolio; not all portfolios will have the same APY.) So combining the guaranteed annual return with variable market-linked return could give you a total average annual return of 8.20% or 9.65%. But keep in mind that this is only an estimate and not a guarantee.

How to invest with Save Market+

Some investments can be risky. Save's Market+ is designed to give you a safe investment (your principal is not at risk), some guaranteed yield (3.00% or 4.20% fixed annual return), and the possibility of higher growth with market returns (that extra 4.00% or 6.65% of average variable returns).

When you sign up for Save Market+, Save will ask you about your risk tolerance and investment preferences, and it will recommend a diversified portfolio based on your investor profile. Save offers a few investment portfolios, such as the Save S&P 500 Risk Controlled Portfolio. Your exact investments will depend on the guidance you give to Save, based on your personal risk tolerance. Your exact yield will depend on which portfolio you have chosen, and will vary based on market performance -- and past performance is no guarantee of future results.

Possible drawbacks of Save Market+

Save Market+ is a complex hybrid investment product that combines some aspects that are similar to a CD with professional investment advisory services. This product is likely to be a better fit for savvy investors who have substantial cash holdings and who can afford to leave their cash alone to grow for a few years. Don't use Save Market+ to hold your emergency savings fund.

To get the full ROI from Save Market+, you have to leave your money invested for the full three years. Save describes this as a three-year "investment program." This is not a savings account or money market account where you can take your cash out anytime; Save Market+ requires a $2,000 minimum deposit, and you have to commit your money for the full three-year duration. And if you have to take principal out early, you might lose some of your initial deposits as part of unwinding the investments that were made with your cash.

Bottom line

Save Market+ is an intriguing three-year investment program that could deliver bigger ROI than even the best 3-year CDs or savings accounts. You get the safety of your principal, 3.00% annual fixed rate of return, and the chance of earning higher yields through market investments and Save's professional investment advisory service. Learn more at joinsave.com/market-plus.