Investors who park savings in a certificate of deposit may be short-changing themselves with their CD choice.

And that mistake can prove costly for investors who feel an impulse to flee the stock market amid a steep downturn being fueled by President Donald Trump’s tariff policy and fears of an escalating global trade war.

“When it comes to buying CDs, it pays to shop around,” said Winnie Sun, co-founder of Irvine, California-based Sun Group Wealth Partners and a member of CNBC’s Financial Advisor Council.

However, paying that withdrawal penalty may be worthwhile for savers who adopt the right strategy, according to a recent research paper by Matthias Fleckenstein, associate professor of finance at University of Delaware, and Francis Longstaff, finance professor at the University of California, Los Angeles.

Specifically, consumers can often get a higher financial return by choosing a long-term CD and paying a penalty to pull money out early, relative to simply picking a short-term CD, the researchers found.

Investors who are unaware of the strategy may get “shortchanged” by banks, Fleckenstein told CNBC.

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The researchers examined weekly CD rates offered by 16,891 banks and branches — ranging from small community banks to big nationwide institutions — from January 2001 to June 2023. Rates were for accounts up to $100,000.

About 52% of CDs offered during that period had such “inconsistencies” in pricing when comparing a given term against a longer-term CD cashed in early, they found.

“It’s the rule rather than the exception,” Fleckenstein said.

“There are banks that do this all the time,” he said, and “there are some that don’t do this at all.”

At banks where this happens, the difference in returns “is not tiny,” Fleckenstein said. In fact, the pricing inconsistency is about 23 basis points, on average, over the roughly two decades they assessed, he said.

Given that disparity, the average investor who invested $50,000 could have gotten an extra $115 of interest by picking a longer-term CD and cashing it in early, their research suggests.

The average size of that pricing difference rose as interest rates began to increase during the Covid-19 pandemic, Fleckenstein said.

About 6.5% of households held assets in CDs as of 2022, with an average value of about $99,000, according to the most recent Survey of Consumer Finances.

Certificates of deposit may be a “great fit” for someone looking for a safe yield — whether someone near retirement, already retired, planning a home purchase in the near future or even a younger investor seeking peace of mind. However, consumers shouldn’t “panic-sell” their stocks and move proceeds into CDs, Sun said.

“Selling at dramatic lows and moving into CDs translates into locking in losses that your financial plan may not be able to absorb,” Sun said.

Like any investment, there are pros and cons to CDs.

For example, unlike other relative safe havens like high-yield savings accounts or money market funds, CDs offer a guaranteed return over a set period with no chance of market-based losses. In exchange, however, CDs offer less liquid access to your cash than a savings account and lower long-term returns than the stock market.

“Shop around for the best CD rate across banks, but also look within banks at whether it actually may pay off to accept a longer term but pay an early withdrawal penalty,” Fleckenstein recommended, based on his research findings.

Long-term CDs typically pay a higher interest rate than shorter-term ones, Sun said. But average rates for one-year CDs are currently higher than those for five-year CDs: about 1.9% versus 1.6%, respectively, according to Bankrate data as of March 31.

Households can pursue other CD strategies, Sun said.

For example, instead of putting all savings into a long-term CD, consumers might put a chunk of their money into a long-term CD and with the remaining funds build a “ladder” of shorter-term CDs that mature more quickly. They can then buy more CDs if they’d like once the shorter-term ones come due.

These days, experts and analysts hang on every signal from Federal Reserve Chair Jerome Powell, right down to the color of his necktie.

In response to a question about his chosen apparel on Friday before business journalists in Arlington, Va., Powell said, “I definitely wear purple ties all the time.”

Initially the Fed chair said he simply preferred the shade, but then elaborated that “it felt a little awkward to be wearing one that was identified” — referring to the political symbolism of red or blue ties, which are often associated with Republican or Democratic parties, respectively.

“We [at the Federal Reserve] are strictly non-political,” Powell said during the question-and-answer session following his prepared remarks at the Society for Advancing Business Editing and Writing conference. “I can’t stress that enough.”

“It’s not that we are bipartisan, we are non-political — we don’t do that and so purple is a good color for that, that’s all. Plus I like purple ties.”

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The Federal Reserve has always operated autonomously from the White House. As an independent agency, the central bank governs decisions about monetary policy without interference from the president or any branch of government. Therefore, it is theoretically free from political pressure.

And yet, Fed board members are nominated by the president and must be approved by the Senate. President Donald Trump nominated Powell to head the nation’s central bank in 2018, but he has a contentious history with the Fed chief ever since.

On the campaign trail, Trump said the president should “at least have a say” in Federal Reserve decision-making. Last week, Trump called for lower interest rates, even as his sweeping tariff policy battered markets and raised fears of a rebound in inflation.

“This would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates. He is always ‘late,’ but he could now change his image, and quickly,” Trump said in a post on Truth Social. “Energy prices are down, Interest Rates are down, Inflation is down, even Eggs are down 69%, and Jobs are UP, all within two months – A BIG WIN for America. CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!”

However, the central bank has also said that new trade policies are a barrier to cutting rates.

The Fed left its benchmark unchanged in recent meetings, in part because the new tariffs could lead to a widespread rise in prices that complicate the inflation picture, at least temporarily.

“Looking ahead, higher tariffs will be working their way through our economy and are likely to raise inflation in coming quarters,” Powell said Friday. “We are well positioned to wait for greater clarity before considering any adjustments to our policy stance.”

The central bank is “trying to juggle the opposing forces of a potentially flatlining economy and rising prices,” according to Bankrate’s senior economic analyst Mark Hamrick. “The Federal Reserve has a tough job under the best of circumstances and an unenviable one during difficult times,” he said.

“There’s greater pressure on Powell,” said Brett House, economics professor at Columbia Business School. But, “paradoxically, the easier that makes it for the Fed to maintain its independence and the more straightforward it is for them to remain true to their mandate.”

Through the Federal Reserve Act, the legislative and executive branches of the government set the mandate of the Fed to promote maximum employment, keep prices stable and ensure moderate long-term interest rates, House explained.

Trump said in December that he does not intend to fire Powell. The Fed chair said Friday that he “fully expects to serve all of my term,” which will conclude in 2026.

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“Dead” investors often beat the living — at least, when it comes to investment returns.

A “dead” investor refers to an inactive trader who adopts a “buy and hold” investment strategy. This often leads to better returns than active trading, which generally incurs higher costs and taxes and stems from impulsive, emotional decision-making, experts said.

Doing nothing, it turns out, generally yields better results for the average investor than taking a more active role in one’s portfolio, according to investment experts.

The “biggest threat” to investor returns is human behavior, not government policy or company actions, said Brad Klontz, a certified financial planner and financial psychologist.

“It’s them selling [investments] when they’re in a panic state, and conversely, buying when they’re all excited,” said Klontz, the managing principal of YMW Advisors in Boulder, Colorado, and a member of CNBC’s Advisor Council.

“We are our own worst enemy, and it’s why dead investors outperform the living,” he said.

The average stock investor’s return lagged the S&P 500 stock index by 5.5 percentage points in 2023, according to DALBAR, which conducts an annual investor behavior study. (The average investor earned about 21% while the S&P 500 returned 26%, DALBAR said.)

The theme plays out over longer time horizons, too.

The average U.S. mutual fund and exchange-traded fund investor earned 6.3% per year during the decade from 2014 to 2023, according to Morningstar. However, the average fund had a 7.3% total return over that period, it found.

That gap is “significant,” wrote Jeffrey Ptak, managing director for Morningstar Research Services.

It means investors lost out on about 15% of the returns their funds generated over 10 years, he wrote. That gap is consistent with returns from earlier periods, he said.

“If you buy high and sell low, your return will lag the buy-and-hold return,” Ptak wrote. “That’s why your return fell short.”

Emotional impulses to sell during downturns or buy into certain categories when they’re peaking (think meme stocks, crypto or gold) make sense when considering human evolution, experts said.

“We’re wired to actually run with the herd,” Klontz said. “Our approach to investing is actually psychologically the absolute wrong way to invest, but we’re wired to do it that way.”

Market moves can also trigger a fight-or-flight response, said Barry Ritholtz, the chairman and chief investment officer of Ritholtz Wealth Management.

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“We evolved to survive and adapt on the savanna, and our intuition … wants us to make an immediate emotional response,” Ritholtz said. “That immediate response never has a good outcome in the financial markets.”

These behavioral mistakes can add up to major losses, experts say.

Consider a $10,000 investment in the S&P 500 from 2005 through 2024.

A buy-and-hold investor would have had almost $72,000 at the end of those 20 years, for a 10.4% average annual return, according to J.P. Morgan Asset Management. Meanwhile, missing the 10 best days in the market during that period would have more than halved the total, to $33,000, it found. So, by missing the best 20 days, an investor would have just $20,000.

(Experts do offer some caution: Be careful about holding such funds in non-retirement accounts for tax reasons.)

Routine also helps, according to Ptak. That means automating saving and investing to the extent possible, he wrote. Contributing to a 401(k) plan is a good example, he said, since workers make contributions each payroll period without thinking about it.