CD Holders Extract Revenge
Market-Linked CDs (MLCDs) can be a smart solution in today’s environment.
With interest rates near historical lows, Government Bonds and Traditional CDs no longer offer returns that outpace inflation. This has lead to a substantial rise in the purchase of MLCDs which were originally developed by Chase Manhattan Bank in 1987. MLCDs are one of the few products available still offering the potential for returns greater than 3% without risking principal.
Potential benefits of MLCDs.
§ Safety – Principal Protection.
§ Insurance – FDIC Insurance.
§ The issuing bank will return 100% of your principal at maturity.
§ FDIC Insured.
§ MLCDs pay interest each year based on the performance of stocks or commodities.
For CD holders, the low interest rates are frustrating. Short-term CD’s currently have an interest rate less than 1%. Once inflation & taxes are accounted for, the investor could very well end up losing money. When will rates rise? Investors in CD’s need to realize that interest rates are a function of Government monetary policy. The Fed Fund rate is basically at 0%, so in order for CD rates to rise, the Government has to start raising rates, which at this time, could have a negative effect on the economy.
For investors willing to wait it out, to sit tight for the rates to rise- it could be a long wait. Successful investors take advantage of opportunities today. If you would like more information on how Market-Linked CD’s may benefit you, please contact WealthAbundance.