As the Federal Reserve embarks on its rate-cutting cycle, investors question the implications for various investment vehicles, including Certificates of Deposit (CDs). Schwab Center for Financial Research fixed income strategist Cooper Howard joins Wealth! to offer expert insights.

Howard characterizes CDs as "relatively conservative investments," highlighting their FDIC insurance of up to $250,000 per bank per depositor. He emphasizes that CD earnings are fully taxable at both state and federal levels and notes that the credit quality of CDs is generally high due to their insured nature.

For potential investors, Howard stresses the importance of understanding whether they own a callable CD. He explains the associated risk: "It allows the bank to refinance and call that in a little bit earlier, so redeem that CD a little bit earlier. So if you had purchased a CD that maybe was a 3-year CD, this bank may decide to call that in 1 year after it was issued, and you don't get the full income for those three years," he tells Yahoo Finance.

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This post was written by Angel Smith