get asked the same two questions over and over: 1) Where can I find the best savings rate? 2)How do I go about comparing rates on different investments?

The good news is the Web allows you to shop nationwide, comparing savings rates from all over the country. You can then apply for the investment or savings instrument you want without ever stepping into that institution's office. The bad news is that comparing interest rates on various investment options is not a simple matter.

Consider this. On a recent day in late March, Pioneer Savings Bank in Albany offered a seven-year certificate of deposit at a rate of 5.87 percent. At the same time, the Vanguard Total Market Bond Index Fund offered a yield of 6.5 percent. Which is a better deal for you? Pretty hard to tell, isn't it?

The best place to start is by looking at interest rates. The most basic type of interest is called "simple interest." Simple interest refers to interest on your principal only. If you deposit $1,000 and earn 10 percent, you would gain $100 in simple interest in a year. If you left your money deposited for 10 years, you would earn the same $100 each year - or a total of $1,000, bringing your principal and interest to $2,000 at the end of the 10-year period. So you've doubled your money. Not bad.

But contrast that with compound interest. When your interest is compounded, you earn interest on both your principal and your interest. Let's first assume the interest is compounded annually. So your $1,000 in the example above would still grow to $1,100 at the end of a year. But at the end of the second year, you would have $1,210. And at the end of 10 years, you'd have $2,594.

The key is to understand what you're seeing. Interest can be compounded annually as in the example above. But it's usually compounded more frequently. It may be compounded semiannually, quarterly, monthly, daily or even continuously. Clearly, the more often it's compounded, the more interest your interest earns and the more money you'll have. So when you're shopping for a savings instrument, you'll want to know how often interest is compounded.

You'll want to know, too, how often it's credited to your account. Even if interest is compounded daily, it's probably not credited daily to your account. Suppose you've accumulated some interest in your account that hasn't been credited yet and you move to another bank. You'll probably lose that interest. So you might want to ask how often interest is credited to your account and what happens to interest that is earned but not yet credited.

It's helpful, too, to know the annual percentage yield you'll receive on your savings, which takes into account the interest rate, the frequency of compounding and the number of days in the year the bank calculates interest accumulations.

This stuff can get pretty arcane. In her book, Making the Most of your Money, Jane Bryant Quinn suggests that you ask: "If I put $1,000 in the bank today, how much will it earn - in dollars and cents - in one year." Quinn says this is the only true way to compare interest rates.

If you're like most Americans, though, you don't shop for the best savings rates like you do for the best price on audio equipment or a refrigerator. If you're a cynic, you probably figure you get what you pay for. If one bank is offering a higher interest rate than another, it's probably because its financial condition is shaky, right?

Not true. Different banks and savings institutions have different uses for their money. One bank might not be paying much because it doesn't have a profitable use for the money at the moment. But another bank, in another part of the country with a strong economy, might need more money for loans and is thus willing to pay more for deposits to get it.

It's easy for you to check these varying rates by using the Bank Rates Web tool. You can see in a heartbeat what you will gain by locking up your money for a short period vs. a longer period of time.

For example, when I checked on rates recently, I discovered that I could get a three-month certificate of deposit from Hudson City Bank in my home state of New York that paid 5.22 percent at an annual percentage yield of 5.4 percent. How did I do it?

I started by selecting a state from the drop-down menu box under the "Savings" area. I then selected "money markets and CDs," which gave me information about statewide rates in New York. I then selected New York City, which is the nearest city to where I live and sorted the information based on what type of savings instrument I wanted from another drop-down menu box. In this case, it was a three-month CD. The database automatically sorts the institutions based on which one offers the best return. I could choose among money markets and CDs with maturities from three months to seven years.

Seven years is a long time to lock up money in a low-interest rate environment like we have today. One possibility is to use a "laddering" strategy that is popular in the bond market to increase income. Here's how it works. Say you have $10,000 to invest in CDs. You put $2,000 into a one-year CD, $2,000 in a two-year, $2,000 in a three-year, $2,000 in a four-year and $2,000 in a five-year CD.

A year from now, when your first CD comes due, you can roll that money into a five-year CD because you know that in another year, your second CD will become due. That allows you, within a couple of years, to earn five-year CD rates on all of your money and still have a portion of it coming due each year in case you need some for an emergency purchase.

Now back to comparing the 5.87 percent CD with the 6.5 percent bond mutual fund. What to look at?

Clearly, your principal is safer in the bank CD. Provided the CD is under $100,000, your principal is guaranteed by the U.S. government. With the bond fund, your principal can vary as interest rates move up and down. If interest rates go up, you stand to lose principal.

There is no risk with the CD, but there are risks in a bond fund. For one thing, there is a risk that the bond issuers will default. But probably the biggest risk is that interest rates will rise and erode your principal. To determine the likelihood, check the average maturity of the bonds. The longer the maturity, the more they will be adversely affected by a rise in interest rates. In this case, the average maturity is 8.8 years. That's medium-term and fairly risky.

So if you were comparing these two instruments, your decision would come down to the inconvenience of locking up your principal for seven years at a fairly unattractive rate vs. the risk that you'll lose principal in the bond fund.

There is one more danger worth mentioning in a discussion about interest rates and yield. Some bond funds virtually guarantee that you won't get your whole principal back because they juice up the income payments by returning a portion of your principal.

Here's how that works. Suppose you're a retiree who invests $100,000 in a bond fund that is paying out 7 percent. You need this money to live on. So you elect to take the income that's generated from the interest in quarterly checks, receiving about $1,750 each quarter. Suppose bond market conditions change and the fund generates less income. You receive less, right? Not necessarily. Many funds continue to pay the same $1,750, cutting into the fund's principal.

So when it comes time to cash in the bond, you discover that instead of $100,000, you've only got about $85,000 left. That can ruin a perfectly good retirement plan.

The more you understand interest rates and yield, the better you'll do as a comparison shopper on the Web and the more successful you will be as an investor.