Yields on certificates of deposit (CDs) are at their highest level in years. It isn't difficult to find one-year CDs with yields greater than 5%, or 5-year CDs that have a 4% annual percentage yield or higher.

With these excellent risk-free yields, it's not a surprise that many people are choosing to put their money into CDs instead of into the stock market these days. After all, the historical average return of the stock market is 9%-10% annually over long periods, but it can be extremely volatile in the short term. For many people, a guaranteed 4%-5% yield that lets them sleep soundly at night can be an attractive alternative.

While CDs certainly don't replace the long-term compounding power of stocks, especially when it comes to retirement savings, they can be an excellent addition to a well-rounded investment portfolio. And many don't realize that high-yield CDs aren't just offered at banks as an alternative to savings accounts -- they can be opened in tax-advantaged retirement accounts as well.

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Source Fool.com