Market Linked CD’s Can Provide Higher Returns

Market Linked CD’s Can Provide Higher Returns

Market linked CD’s are a good alternative to traditional bank CD’s and annuities.  Bank CD’s are currently yielding 1% on a short term basis and no higher than 3% on a 5 to 7 year term.  Market linked CD’s work differently as they have a guaranteed minimum return (usually .5% to 1%) but have an unlimited upside.  Instead of providing a set return over a period of time, market CD’s base returns on the performance of the securities in the market such as indexes or individual stocks.  If the investment yields a positive return in any given year, a portion is shared with the investor.  If the investment has a negative or neutral return, the investor is credited with the minimum state return such as .5% or 1%.  Market linked CD’s are FDIC insured just like a traditional CD.

Market linked CD’s

Also offer an advantage over indexed annuities in some cases such as the shorter surrender periods of 5 and 7 years vs. 10 years on most indexed annuities.  They also distribute any gains every year which does not tie them up with any applicable surrender charge in the event of early surrender.  One last advantage is that they tend to be based off investments that are more transparent than those used in the more popular indexed annuities.

Rates and offers from various banks change on a month to month basis.  The current offerings for February 2015 have been listed below.  Please email or call our office for additional information

***New Momentum Builder Index Linked CD with 2% Annual Min (Contingent)***

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1. BOW 7CIA – 7 Year Commodity CD with 1% Annual Min

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Each year this CD will pay either 1% or 6.5% interest

REF FEE:               2.00%

ISSUER:                Bank of the West

CUSIP:                  06426XMP2

BASKET:               Cocoa, Coffee, Corn, Lead, Natural Gas

MINIMUM:        1% paid if any commodity is below original price on the annual valuation date

MAXIMUM:       6.5% paid when all five commodities are equal to or greater than their initial price

Deadline is Friday 2/20/15 (Noon EST)

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2. GS 5MB – 5.75 Year Multi-Asset Index Linked CD with 125% Par (Uncapped)

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At maturity this CD will pay 125% of the point to point index gains

REF FEE:               2.00%

ISSUER:                Goldman Sachs

CUSIP:                  38148D4X9

INDEX:                  Momentum Builder Index (+ 12.03% one year return)

MINIMUM:        N/A

MAXIMUM:       Uncapped interest at maturity based on 125% of the index gains

Deadline is Monday 2/23/15 (Noon EST)

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3. NEW – GS 7MB -7 Year Multi-Asset Index Linked CD with 1.25% Par +  2% Min (Contingent)

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Will pay 2% years 1-6 as long as index is positive since inception + 125% index gains at maturity

REF FEE:               2.00%

ISSUER:                Goldman Sachs

CUSIP:                  38148D5F7

INDEX:                  Momentum Builder Index (+ 12.03% one year return)

MINIMUM:        2.00% paid each year the index level is above initial level (Years 1-6)

MAXIMUM:       Uncapped interest at maturity based on 125% of the index gains

Deadline is Monday 2/23/15 (Noon EST)

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4. GS 8MB – 8 Year Multi-Asset Index Linked CD with .75% Annual Min (Uncapped)

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Each year this CD will pay Unlimited interest (1% Floor)

REF FEE:               2.00%

ISSUER:                Goldman Sachs

CUSIP:                  38148D5D2

INDEX:                  Momentum Builder Index (+ 12.03% one year return)

MINIMUM:        0.75% annual guaranteed interest (worst case)

MAXIMUM:       Uncapped annual interest (total return divided by number of years)

Deadline is Monday 2/23/15 (Noon EST)

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5. BOW 7EIA – 7 Year Equity CD with .75% Annual Min

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Each year this CD will pay either .75% or 6.5% interest

REF FEE:               2.00%

ISSUER:                Bank of the West

CUSIP:                  06426XMN7

BASKET:               AT&T (T), Ford (F), Kinder Morgan (KMI), Mattel (MAT), PPL Corp (PPL)

MINIMUM:        0.75% paid  when any equity is below its original price on the annual valuation date

MAXIMUM:       6.5% paid when all five equities are equal to or greater than their initial price

Deadline is Monday 2/23/15 (Noon EST)