Ask Stacy: Are Market-Linked CDs a Good Investment?

David Letterman's Stupid Pet Tricks were funny and ran for 30 years. Wall Street's stupid investment tricks have been going on longer but aren't funny at all. This is a great example.

Why do they do this?

Visit the cleaning products aisle in your local supermarket, and you’ll find literally hundreds of boxes, bottles, pods, wipes and packages of what boils down to soap. The packaging screams things like “NEW!”, “IMPROVED!” and the ever popular “NEW AND IMPROVED!” But how many meaningful improvements can really be made to cleaning products?

Because they can’t materially alter their products, the easiest option to goose sales is to simply repackage what they already offer and call it new.

Wall Street’s no different. When it comes to investments, boil it down, and you can either be an owner (stocks) or a loaner (bonds, CDs, etc.). That’s about it. Since they can’t materially alter their products, the easiest option to goose sales is to simply repackage what they already offer and call it new.

This is how stupid investment tricks are born.

Other opinions on market-based CDs

From an FDIC-issued consumer alert of Market-Linked CDs:

While some of these market-linked products might be right for some consumers, there are definitely potential risks and other issues to consider before investing.

If you’re considering a market-based CD, check out this alert. It has nine questions to ask before investing.

From a Forbes article called Equity Linked CDs: More Garbage Wall Street Wants To Feed You:

Are equity linked CDs a good deal? Perhaps for some investors. But, reviewing this offering reminded me of those words of wisdom that my mother used to whisper as she bounced me on her knee: “Son, there ain’t no such thing as a free lunch.” So true, Mom!

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About me

I founded Money Talks News in 1991. I’ve earned a CPA (currently inactive), and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate. Got some time to kill? You can learn more about me here.

Got more money questions? Browse lots more Ask Stacy answers here.

Stacy Johnson
Stacy Johnson @moneytalksnews
I'm the founder of Money Talks News and have spent the last 40+ years in the personal finance trenches. I'm a CPA, author of a few books and multiple Emmy recipient. I'm ... More

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