What strategy should you use if you believe interest rates will rise in the future and want to invest $10,000 in a Certificate of Deposit (CD)?

Investing in a short-term Certificate of Deposit (CD) and rolling it over is the advisable strategy when anticipating rising interest rates in the future. The rationale behind this approach lies in the nature of interest rates and CD investments.

When interest rates increase, newly issued CDs typically offer higher yields than those issued previously. By investing in a short-term CD, you can take advantage of the higher rates more quickly. Once the term of the short-term CD ends, you have the option to reinvest at a new, potentially higher interest rate, thus maximizing your earnings over time as rates continue to rise.

Moreover, this strategy provides flexibility as you are not locked into a long-term rate that might become less advantageous if rates increase. It allows for better alignment with the changing economic conditions that affect interest rates.

In contrast, long-term CDs would lock in your current rate for an extended period, missing out on the benefits of higher rates when they eventually emerge. Keeping the money in a savings account might provide liquidity, but typically savings accounts offer lower interest rates compared to CDs. Investing in stocks introduces different risks and does not provide the guaranteed returns or safety that CDs offer, especially if your priority is capital preservation and earning interest in a rising rate environment.