Typically, Russell said, an investor will get a certificate for six months and up to two years. Unlike a bond, where the interest is paid out in regular intervals, most CDs compound interest. That means the interest earned goes back into the certificate, allowing the principle to grow. There may be a penalty, however. Since CDs tend to mature in less time than bonds, banks usually have a penalty for early withdrawal.
Bonds don t have that penalty, but it s possible to lose in the ever-changing bond market.
Diversifying your portfolio by combining CDs and bonds is ideal, said Sherry Meyer, a broker with Edward Jones.