market-linked CDs, anyone?

[norisk]

Have any of you looked into market-linked CD products? like this one.

http://www.fisn.com/resources/pdf/H... index Basket Qt Av Min MLD 6Yrs 05-25-10.pdf

You get some participation in the index - in this case they take quarterly average value of the index over the 6 years CD maturity and you get 100% of that number (paid at maturity). Under some scenarios it does better then point to point, but in other scenarios it does worse (ie if the index is steadily going up over the 6 years you will get only about 50% participation).

what maks me curious about these is 100% FDIC insurance (because you buyt it from the bank) and full principal protection. So this is basically no risk investment with some upside potential. The tax issue is a nuisance since you have to pay estimated tax each year even though you have not gotten any income.

Another neat thing on this one it has average of 3 indicies - US, Europe and Hong Kong, which also seems like a neat idea.

There are surrender charges but not nearly as bad as you get with EIA.
http://www.fisn.com/resources/pdf/H... index Basket Qt Av Min MLD 6Yrs 05-25-10.pdf
Any comments?

Thanks
NR

http://www.fisn.com/resources/pdf/H... index Basket Qt Av Min MLD 6Yrs 05-25-10.pdf

 

[brewer12345]

This is an unnecessarily complex product with high internal expenses and poor liquidity. Worse, you do not even get the tax deferral of an EIA (about their only redeeming feature). I suggest rolling your own, as I detailed in a lengthy post some time in the past.