Market Linked CDs

[OHjosh]

Please spare me lecture on annuitites; I have two and they are a done deal. One comes due next May and I was told by an adviser that the only vehicle I should consider for investing that money is a Market Linked CD. I never heard of these before. Any ideas about that?

 

[REWahoo]

Google found this: https://www.investopedia.com/articles/investing/092316/6-reasons-beware-marketlinked-cds.asp

According to the Wall Street Journal, after fees, limits and other factors come into play, market-linked CDs often underperform conventional CDs. The newspaper analyzed 147 market-linked CDs issued since 2010 and discovered that 62% of those products underperformed conventional CDs. Furthermore, roughly a quarter of them paid no return at all.

Like many commissioned financial products, the only party to the transaction guaranteed to make money is the seller.

 

[njhowie]

If you are interested in market linked CDs, TIPS treasury securities would be a comparable alternative with no fees. There are also ETFs for TIPS securities if you don't want to purchase the TIPS directly...though ETFs do have fees/expenses built in.

https://www.treasurydirect.gov/instit/marketables/tips/tips.htm

Top 14 TIPS ETFs

 

[OldShooter]

Run. Find another advisor who is a fiduciary.

The more complicated the financial product the more likely that it has been designed to make money for the seller, not for you. (From your post I think you have already learned this rule via your annuity purchases. Never forget it.)

Re @njhowie, you can also buy TIPS through Schwab, Vanguard, et al for low- or no-fees. This eliminates the hassle of setting up an account at TreasuryDirect, transferring money, etc.

 

[pb4uski]

A market linked CD is akin to an equity indexed annuity... I wouldn't buy either one.

 

[jazz4cash]

We had this question come up a short while ago. There was not a lot of discussion (unusual for this board). I was offered one years ago and it felt too gimmicky to me. Wells Fargo was the issuer I think. The returns were too low unless the market went up and too many games on how they measure the market to credit the CD.

 

[wolf]

Run. Find another advisor who is a fiduciary.

The more complicated the financial product the more likely that it has been designed to make money for the seller, not for you. (From your post I think you have already learned this rule via your annuity purchases. Never forget it.)

Re @njhowie, you can also buy TIPS through Schwab, Vanguard, et al for low- or no-fees. This eliminates the hassle of setting up an account at TreasuryDirect, transferring money, etc.

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