SGOV vs CDs, which is a better short-term investment? SGOV beats CDs, easily, in four key areas:
- Taxes
- Liquidity
- Yield
- Minimums
Taxes
Both SGOV and CDs are taxed at ordinary income tax rates. The key difference between these investments is that while CDs will be taxed at both the Federal and State level, SGOV on the other hand, will only be taxed at the Federal level.
SGOV is completely invested in U.S. treasury bills. Treasury bills, like all U.S. government securities, are state tax-exempt.
If you live in a state with an income tax, especially a state with a high tax rate like California, New York or New Jersey, buying SGOV over a CD is a no brainer.
Liquidity
Because SGOV is an ETF, you can buy and sell SGOV any time during normal stock market trading hours. SGOV has over $63 billion dollars in the fund. Average daily volume is 15.9 million shares. What this means is that there is a lot of liquidity in SGOV. You can sell your SGOV investment any time you need cash. Settlement for an ETF like SGOV is trade date + 1 business day. For example, if you sell your SGOV position on Tuesday, your cash will be available for withdrawal from your brokerage account, the following day, Wednesday.
CDs generally have no liquidity. Once you buy a CD, the bank loans your money out to other customers and you are now a liability to the bank. You cannot just call up the bank and get your money. You generally must wait until the expiration of the CD term to get your money back plus your interest. If you can get out of a CD before expiration, you can expect to face a penalty such as giving up your interest or for secondary market CDs, potentially selling the CD for less than you paid for it. CDs have various term structures typically in the 1-to-5-year time frame.
Why would you ever lock up your money for a year or more in an illiquid investment with a low return and high tax structure?
Yields
CDs generally yield less than SGOV. According to Google as of early December 2025 the national average 1 year CD is 1.93%. The SGOV 30-day SEC yield as of November 26, 2025, is 3.86%. Much better than CDs. While you may find a CD with a higher yield than SGOV, after you adjust for your state income tax, your CD yield is likely to be less than the yield on SGOV. For example, if you live in New York, New Jersey, or California, your state income tax could be 10% or higher. If you invest in a CD that yields 4% and you must pay 10% in state income tax; your after-state income tax yield, is only 3.60%.
Minimums
Banks are notorious for playing games with you to get the best rate on a CD or a high yield savings account. Generally, you need to deposit a minimum amount to get their best rate and sometimes this can be $100,000 or more. SGOV has no minimums.
Safety
Over the years I have met many CD investors who are drawn to the FDIC insurance backing of CDs. They feel safe, with the FDIC guarantee. But who stands behind the FDIC guarantee? The U.S. Government. If we had a depression and banks were to fail in numbers greater than FDIC could cover, the U.S. Government would be obligated to step in. When you buy SGOV, your investment is in U.S. treasury bills, which is debt of the U.S. Government. In a dooms day scenario where are you more likely to get paid back, from a failed bank relying upon FDIC to pay its creditors or the U.S. Government making good on its promise to repay treasury bills? While both are extremely safe, I feel more comfortable investing directly with the U.S. government.
The choice between SGOV and CDs is pretty clear. I say ditch the bank and buy SGOV.
Ethan S. Braid, CFA
President
HighPass Asset Management
Denver, Colorado