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Are Certificates of Deposit worth it compared to investing in the stock market?
For the specific example you gave, a CD with a 0.05% rate of return, I'd shop around some more, that's a VERY low rate of return. A more realistic one would be 0.5%, depending on the terms. As has been mentioned, CDs are good when you need to preserve your capital. What might be a situation for that? They are great for Emergency funds, which you should always have a reasonable amount of cash in. I have a set up 3 CDs with 12 month terms, each carrying about 30% of my emergency savings. The remaining 10% I keep in a standard savings account, for quick access dealing with a short term emergency. The 3 are spaced about 4 months apart, so that I'm always within 4 months of having one come to term. They have a 3 month penalty if I withdraw early, but based on the fact that I have never had to touch more than 10% of my emergency savings, I'm perfectly okay with that. What about more long term savings? Well, it depends on what your timeframe is for using the money. If it's more than 10 years, and you are willing to risk losing some of it, then by all means invest in a higher risk higher reward investment. If it's only a few years, maybe a bond fund is something that would be better. And if you really need to preserve the money, then a CD can be great too.