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JP Morgan 7yr ETF Efficiente CD
Old 02-04-2012, 07:03 PM   #1
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JP Morgan 7yr ETF Efficiente CD

Hi Everyone,

My wife who is ultra conservative was pitched a JP Morgan 7yr ETF Efficiente CD by her bank the other day. The underlying ticker is EEJPUS5E.

She was basically asking about safe investment which would have better return than a savings account or CD. Which I imagine everyone is interested in.

From what I can gather (with my inexperienced investment brain)
It is an investment where your principle is FDIC insured. The gains are tied to a group of ETF's. It pays 115% of the value of these indexes at maturity.

I believe you can get out of it at anytime and receive the value at the time.

It almost sounds pretty good, but I know that can't be.
I imagine if you owned these indexes, you may receive dividends, in this case I don't believe you would.

If anyone can provide any insight here I would really appreciate it.
Thanks in advance.
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Old 02-04-2012, 07:12 PM   #2
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Its an equity indexed CD and there is lots of fine print and catches. A handy explanation of how these things work and how to recreate one yourself for a lot less in underlying expenses is here: Life, Investments & Everything: Rolling Your Own
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Old 02-04-2012, 07:14 PM   #3
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Details matter *a lot*. Please post the offering document. Since only the principal is guaranteed, you will be giving up say 2.75% a year (PenFed 7-year CD) in exchange for potentially higher returns on the linked ETFs. Details in caps, averaging method, etc. will make this either a OK deal or a very poor deal.
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Old 02-04-2012, 08:40 PM   #4
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You guys are great, Thank you so much for your replies.

Thanks Brewer12345 for the link. I understand the logic now, as to how they work, Just can't figure out where some underlying fees might be or if there are caps.

Unfortunately I can't find a copy of the offering on the web. I may be able to scan it tomorrow. Not sure if I can upload a file to the forum though.

I would really love to have some good arguments as to why I don't think we should buy these, when we go back to the bank.
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Old 02-04-2012, 08:45 PM   #5
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Just go through the document and highlight each one of the fees, then add them all together. Don't forget to look at all the footnotes, which is where they like to hide these little details, scattered throughout the 50+ page brochure.
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Old 02-05-2012, 07:32 AM   #6
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Quote:
Originally Posted by SaverNY View Post
Hi Everyone,

My wife who is ultra conservative was pitched a JP Morgan 7yr ETF Efficiente CD by her bank the other day. The underlying ticker is EEJPUS5E.

She was basically asking about safe investment which would have better return than a savings account or CD. Which I imagine everyone is interested in.

From what I can gather (with my inexperienced investment brain)
It is an investment where your principle is FDIC insured. The gains are tied to a group of ETF's. It pays 115% of the value of these indexes at maturity.

I believe you can get out of it at anytime and receive the value at the time.

It almost sounds pretty good, but I know that can't be.
I imagine if you owned these indexes, you may receive dividends, in this case I don't believe you would.

If anyone can provide any insight here I would really appreciate it.
Thanks in advance.
I think FDIC insures the principal .
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Old 02-07-2012, 10:03 AM   #7
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I found a link to the disclosure statement.
http://www.jpmorgan.com/cm/BlobServe...ble=MungoBlobs

I wouldnt get involved withthis for anything.

It is amazing how hard the bank was pushing this. They were really pushing the fact that you can get out anytime you want when the indexes are high.
Everything i have read so far suggests you have to keep it to term, or there may be fees.
If anyone feels like looking at this and pointing out some other negatives, that would be great.
I had just told the advisor at the bank, that i moved my old 401k to Vanguard and he actually said, that once he tells me about these linked CD's I will rethink putting my stuff at Vanguard.
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Old 02-07-2012, 10:40 AM   #8
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Originally Posted by thefinancebuff View Post
Details matter *a lot*. Please post the offering document. Since only the principal is guaranteed, you will be giving up say 2.75% a year (PenFed 7-year CD) in exchange for potentially higher returns on the linked ETFs. Details in caps, averaging method, etc. will make this either a OK deal or a very poor deal.
Who would buy a 7 year CD at 2.75% when we know rates are going up?? There are higher rates than that for 5 years..........
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Old 02-07-2012, 12:08 PM   #9
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Who would buy a 7 year CD at 2.75% when we know rates are going up?? There are higher rates than that for 5 years..........
Bought 6 year bonds with a 15% yield. But we are probably not talking about the same risk level.
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Old 02-07-2012, 12:33 PM   #10
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Who would buy a 7 year CD at 2.75% when we know rates are going up?? There are higher rates than that for 5 years..........
.....and what are they? I don't like it when the sentences aren't finished. Care to provide a link to the 5 yr CD(?) that's available now and a higher rate than the 2.75% listed? I'm curious to see what it is.....
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