The Bank of Jamaica is making it more affordable to invest in their CDs.  And no, the BOJ doesn’t have an album out. So if you’re wondering what a CD is and how you can make money off it, stay tuned

So Jamaica’s central bank just slashed the minimum amount to invest in its 30-day certificates of deposit from $J1 million to J$100,000 (Jamaican dollars of course). 

That’s a massive deal because it means more investors can access CDs, which tend to be considered less risky than stocks.

So what is a CD?

CD stands for Certificate of Deposit, also called a fixed deposit.  It’s basically a savings account that pays a fixed interest rate on funds held for an agreed time. 

The plus side is that they pay more interest than regular savings, but the downside is that you can’t touch that money until the fixed period is over.  This can be 30 days, 60 days, 90 days, or even a year, depending on the institution.

So for example, if you put a million dollars in a CD for one year, you lose access to your million dollars for that year.  But at the end of the year, your million dollars would’ve grown much more than if you just had it in a regular savings account.

Regular savings in Jamaica right now is only paying about 1% interest.  With a CD, you can get 7% and more!

Now just to clarify, when I said that you can’t touch your money while it’s in a CD, that’s not entirely true.  You can, but you’ll pay a penalty if you withdraw before the time.

So back to the BOJ.  They have a 30 day CD that pays 7.5% annualized interest.  That word “annualized” is important.  It means for the year.  Even though the CD is for one month, you’re not gonna get 7.5% interest after just one month because that interest rate is the annual rate.  To get the monthly rate, you’ll divide that by 12.

But that’s still a pretty decent rate on a fairly “safe” investment, so BOJ CDs are usually a hot ticket.  So hot that the BOJ auctions them off every Wednesday.  You have a lot of people who want them, but not everybody can get.

It used to be that you needed at least $1 million to play in this game.  But according to an Observer article by David Rose, the BOJ cut that down to just a hundred thousand at its May 22 auction.

They were selling $34 billion worth of CDs, and they had $42 billion in offers. So like I said, hot ticket!

In this high interest rate environment, many investors consider CDs a good, safe, reliable bet. Our Taking Stock analysts have been saying this for the past two years, especially with the volatility in the stock market right now.

And with inflation right now at 5.3%, the BOJ’s 7.5% CDs are looking good.  Because you always want to look for an investment that can beat inflation.  That way, even when inflation is making everything more expensive, you’re still able to keep up. 

Now remember, this information is for educational purposes only and is not to be considered investment advice.  Please consult your licensed financial advisor on any investment decisions.

And that’s the bottom line.