(Gubmints Note: This is part of a multi-part post, which will also extoll the virtues of Structued CDs and Structured Notes, and provide strategies on how to use them. At the time of this writing I hold an S&P Index-linked Structured CD in a Retirement Account).
With bond and bank CD rates near zero, investors have been scrounging everywhere they can to find respectable yields (Note, if you’re a Govvie the best place to park cash is the TSP’s G Fund– It gives you returns of long-term bonds with the liquidity of a Money Market Fund. You can’t find a product like this anywhere). Folks without a G Fund generating their current income may resort to chasing yields in complex products like Structured CDs.
A Structured CD allows you to purchase participation in an index (like S&P 500 or DJIA, but it could be any index) up to a participation ‘cap’. Your initial investment value is guaranteed by FDIC insurance (which, per Dodd-Frank, is up to $250,000 per bank/instutution). No downside with huge potential upside? Sounds too good to be true!
Here’s Ten Reasons Structured CDs and Structured Notes Suck:
