Risk is the most ill understood item for most casual invenstors. Any type of investment with a return has some type of risk. That return is your reward for taking a risk. The higher a return the greater risk you are taking. Look at banks with the highest CD rates and look closer and you will see higher risk somewhere.
It’s because the risk is higher for CDs, but much lower for Treasury securities. It’s because even within the realm of government guarantees, there’s a pecking order.
The first-priority guarantee: Maturing securities that were issued by the U.S. Treasury department itself.
The second-priority guarantee: Maturing securities that were issued by other government agencies, such as Ginnie Mae.
Third: The Treasury’s backing of the FDIC.
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