Equity-Linked Certificate of Deposits

People who prefer to invest their money in risk-free deposit account options tend to look at the standard banking products - high interest savings accounts, CDs, money market deposit accounts, IRAs, etc. Some may get a little creative and look into annuities. If you feel the need to have an equity-indexed annuity type of investment in your portfolio, chances are you would be interested in a little known investment called an equity-linked certificate of deposit. It's a lower cost alternative to annuities that allows you the peace of mind of having your principal deposit guaranteed by the Government yet still benefit from the growth of the market index.




Equity-Linked Certificate of Deposits

People who prefer to invest their money in risk-free deposit account options tend to look at the standard banking products - high interest savings accounts, CDs, money market deposit accounts, IRAs, etc. Some may get a little creative and look into annuities. If you feel the need to have an equity-indexed annuity type of investment in your portfolio, chances are you would be interested in a little known investment called an equity-linked certificate of deposit. It's a lower cost alternative to annuities that allows you the peace of mind of having your principal deposit guaranteed by the Government yet still benefit from the growth of the market index.

Insurance agents selling equity-indexed annuities get up to 13% commissions! They often pitch these annuities to seniors because of their general risk avoidance tendencies, but some people lose out big time financially if they need to pull their money out sooner than planned. In addition to losing the 13% commission paid to the agent, people who must surrender their policies early end up paying steep surrender penalties and various fees to access their money.

A good alternative to annuities are equity-linked certificate of deposits. They have many of the same benefits that equity-indexed annuities offer, but fewer disadvantages- including far less fees.

Instead of purchasing an equity-linked certificate of deposit through an insurance agent like you would an equity-indexed annuity, you buy them from a bank and bypass the 13% agent commission. The equity-linked CDs pay returns based on the S&P 500 (or other stock market index) and they are federally insured up to $100,000 per individual by the FDIC, like all other certificate of deposit products. Equity-indexed annuities are not FDIC insured. There are a handful of equity-linked certificate of deposit options with a small $1,000 minimum, but the majority require a deposit of $25,000 or more.

You are one hundred percent safe against losing your principal deposit in an equity-linked CD, unless you pull your money out before you've reached the end of your term. Will agree to the punishment from some form of pre-term withdrawal, but if you have not been paid large commissions to agents to enable the CD to the redemption penalty is much smaller than you would pay if you are straight - indexed annuity. and the need to reach before payment plan.. Equity-linked CD's have shorter term commitment options than equity-indexed annuities.

While the advantage of an equity-linked certificate of deposit are obvious, there is also a disadvantage to consider if you intend to invest in one. These CD's don't typically pay interest until they have matured, so if you're looking for an investment that provides steady income - you won't want to consider an equity-linked CD.

Why haven't you heard of equity-linked certificates of deposit before? It's simple: they don't have the large commissions that equity-indexed annuities and other investments offer agents, so they are not recommended as often. There isn't a financial incentive for the financial advisor to steer his or her clients toward an equity-linked CD.

Debra Dragon is a freelance writer for DepositAccounts.com She writes about how to make your money work better for you through various deposit accounts, including savings accounts, interest checking accounts IRAs, and money market funds.

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Investing in Certificates of Deposits

When most people think of saving and investing, particularly the older generations, they generally think of Certificates of Deposits (CDs). Here's all you need to know.




Investing in Certificates of Deposits

When most people think of saving and investing, particularly the older generations, they generally think of Certificates of Deposits (CDs). A Certificate of Deposit is a time deposit commonly offered by banks, credit unions, and savings and loan institutions. Since CDs are insured by the FDIC, just like savings and checking accounts, they are considered a "cash investment," which simply means cash in a CD is like having "cash in the bank."

How CDs Work

Investing in CDs is simple: you can choose the date, ie 6 months to 3 years, or 5 - or 10 - years and look for the highest rate. Once you've found the best deal, it is a simple application process to open a CD account at your bank of choice. Note that you can't get access to your CD before the maturity date without stiff penalties, so it's best to choose a shorter maturity if you aren't sure when exactly you will need your money.

CD Interest Rates

The range of interest rates offered by Certificates of Deposit usually range between that of savings and money market accounts and that of corporate bonds. CDs are a bit riskier than cash in a savings or checking account since you are locked in for the duration of the contract. If interest rates go up, you can't easily cash out of a CD without paying a penalty. That said, CDs are less risky than most bonds because the principal doesn't fluctuate. And since they are FDIC insured, you don't have to worry about losing money in a CD. A corporate bond, on the other hand, could potentially become worthless if the company declares bankruptcy.

In today's technology-driven world, it is possible to use the internet to find the highest-paying CDs nationwide. Since most banks allow you to do pretty much everything online, there's no reason you couldn't open a CD at a bank halfway across the country.

CD Penalties

Withdrawing funds from a Certificate of Deposit before the maturity date could result in severe penalties, often equal to as much as 10-15% of your accumulated interest to date, not to mention missing out on future interest payments.

Visit AmateurAssetAllocator.com for more on where to find a high interest CD online, Roth IRA rules, and other personal finance/investing topics.

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The Truth About FDIC and Certificates of Deposit (CDs)

When you are told by a banker or receive a promotional letter from a financial institution regarding a special Certificate of Deposit (CD) rate, please think before you act. Most bankers love CD's simply because it will lock your money into a product that will charge a substantial fee if withdrawn prior to maturity. In addition most bankers get a commission for new money deposited into a CD. When I was a banker, I had always been one of the few that disliked CD's for many reasons.




The Truth About FDIC and Certificates of Deposit (CDs)

When you are told by a banker or receive a promotional letter from a financial institution regarding a special Certificate of Deposit (CD) rate, please think before you act. Most bankers love CD's simply because it will lock your money into a product that will charge a substantial fee if withdrawn prior to maturity. In addition most bankers get a commission for new money deposited into a CD. When I was a banker, I had always been one of the few that disliked CD's for many reasons. I find them only useful for very few things. Since I am no longer a banker I want to give you the dirty truth behind CD's that most do not know and what is your REAL rate of return from those "promotional" CD's you find online or in your current bank.

First off, CD's are a fixed income vehicle that is backed by the FDIC. Many people trust the FDIC for its insurance and the deposit is in fact guaranteed (up to $250,000 per DEPOSITOR until 12/31/2013). What you most likely did not know is how you get paid and when. You are covered up to this a certain amount but the time it takes to pay you however is never documented. From my research and what I was taught years ago as a banker is the following: The FDIC can take up to 99 years to pay (not a typo)! There is no public documentation of how long it takes to pay however based on the fact that if ANYTHING catastrophic was to occur financially, the FDIC will have time to pay. So if you expect immediate payment with a simple claim of lost funds from an FDIC insured product, you are sadly mistaken. The FDIC is also an INDEPENDENT AGENCY of the federal government. They receive no congressional appropriations (money) and it's fully funded by the premiums (payments) from banks and thrift institutions pay per deposit coverage as well as earnings from U.S. Treasuries. Most people do not have to worry however since most major banks are more than willing to buyout smaller/failing financial institutions in order to acquire more clients and show positive PR (public relations) to the masses. This has shown more than enough evidence with what has happened in 2008-2009.

FDIC products are fully taxed. If you purchase a CD, the growth will be fully taxes (state, federal, local) just as if you have earned this income from working. This is based on your tax bracket which is as follows (2010):

Bracket / Single / Married:
10% Bracket / $0 - $8,375 / $0 - $16,750
15% Bracket / $8,375 - $34,000 / $16,750 - $68,000
25% Bracket / $34,000 - $82,400 / $68,000 - $137,300
28% Bracket / $82,400 - $171,850 / $137,300 - $209,250
33% Bracket / $171,850 - $373,650 / $209,250 - $373,650
35% Bracket / $373,650+ / $373,650+

Now, most of you that purchase CD's are aware of this. However, what most fail to realize that CD's do NOT catch up with the rate of inflation. The rate of inflation is measured by the CPI (Consumer Price Index, I have described what this details on a previous article which can be found in my previous post). For whatever investment, income, or interest you earn to not match or exceed the CPI, you are losing money long term. This is a volatile index but long term averages around 2.5%. This means you must earn either 2.5% or more AFTER TAXES long term in order to maintain your cost of living life style.

For example: You are in a 25% bracket and have purchased a 12 month CD at 2% APY for $50,000. You earned $1,010 from the interest which equals 51,010 but you have to pay taxes on the growth (your tax bracket) which will equal to $253. You have earned after FEDERAL taxes $757 (some state and local taxes may occur that will lower your return even further!). Now here is where most people do not pay attention to, the CPI for the year. Let's be fair and say it is 1.6% for the year (less than the average, just to make a point). You would need to earn $800 AFTER TAXES from that 50,000 in order to keep up with the rate of inflation. Your real rate of return is negative $43. To keep up with this inflation rate will need to find a CD with the percentage (approximately) 2.8% or more depending on what living in. Please remember that we are talking about a tax payer in the 25% bracket which is considered the national average. These rates become considerably higher if you're considered "High-Net-Worth".

Not all CD's are bad. If you are one of many that cannot withstand volatility what-so-ever than it is best to purchase CD's within a IRA this way taxes are deferred or Roth IRA which no taxes are paid after withdrawal (please see my article on IRA's for details). Also, CD's are probably the best product to purchase if you are planning on using the money short-term and cannot risk ANY volatility. Short-term can be considered 2 years or less. I highly recommend CD's for home buyers (in 2 years or less) since the deposit in your home are tax deductable therefore the taxes on interests earned on a CD will be taken care of.

There are many considerably safe products that have low maturity dates and have considerably better returns than a CD. In the end, before you purchase the CD, know what your intentions are and when do you think you're going to need it. If it's for educational purposes, there are products that can be a better option for you and your child (529 plans, UGMA/UTMA for example). If it's for medical bills, there are products out there for that as well (Health saving plans). The point is to use a CD only for short term purchases that can be tax deductable or within tax favor accounts. Many people use CDs to prepare for a birthday or holiday in that year and that is ok as well! The key is "short-term". If it is for emergency funds, your best bet is to simply put it in a money market where there won't be any implications or charges for early withdrawal.

I hope I was able to educate you on CDs and now more aware of what you are getting into. If you have any questions or concerns please feel free to contact me!

Resources:
FDIC: http://www.fdic.gov/about/learn/symbol/index.html
SIFMA Calculators: http://www.investinginbonds.com/story.asp?id=207

Financial Consultant, Risk Manager, Insurance Agent, and Retirement Planner here to give honest opinions on the current financial trends. (*Please note: If you have ANY questions, please feel free to contact me. I will be more than happy to chat with you!). http://www.MichaelAponte.Biz

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Certificates of Deposit - What is it?

Define Certificate of Deposit (aka CD) and what is a domestic CD and what are the International CD options such as Offshore CD or Eurodollar Certificates of Deposit. The advantages of International CD are higher interest rates, income tax benefits, anonymity. BNP, Banco Nacional do Panama. London Interbank Offered Rate (LIBOR) discussed.




Certificates of Deposit - What is it?

Commonly referred to as a CD, a Certificate of Deposit can be used as a short or long term investment. Domestic banks offer FDIC (Federal Deposit Insurance Corporation) insured Certificates of Deposit with higher rates of return than other investment options. The bank retains money for a specified period of time with the promise to repay the principal and interest to the depositor at the conclusion of the investment term.

Depending on the amount of money you invest, and the particular terms of the bank you choose to invest with, you may choose to invest your money for a period as short as one month to six years. There is usually a penalty for withdrawing money from a CD prior to the maturity date. Banks will also require a minimum deposit to open a Certificate of Deposit.

OFFSHORE CERTIFICATES OF DEPOSIT

International Certificates of Deposit vary slightly from domestic CDs. International Certificates of Deposit can also be referred to as Offshore Certificates of Deposit or Eurodollar Certificates of Deposit. When obtaining a Certificate of Deposit<<<<<<</a>/a>/a>/a>/a>/a>/a> from an offshore bank, the investor signs an agreement with the bank in which the bank agrees to pay a fixed interest rate in exchange to use the money during the specified time period.

Similar to domestic banks, offshore banks have different needs to use as a CD minimum amount of deposit. Often the amount required for an Offshore Certificate of Deposit will be much higher than what is traditionally required from domestic banks.

There are several advantages to having a Certificate of Deposit from an offshore bank. The advantages include:

1. Higher interest rates. Unlike domestic banks, offshore banks are not government regulated and are free to compete against each other for better rates. Depending on the country you choose to bank in, interest rates can be as high as ten percent.

2. Another advantage to having an Offshore Certificate of Deposit is the income tax benefits. If you choose to open a Certificate of Deposit in a recognized tax haven such as Panama, you will not be taxed on interest earned because that particular government does not impose interest on income taxes.

3. A third major advantage to an Offshore Certificate of Deposit is the anonymity and confidentiality offered to protect your assets. Depending on the jurisdiction you choose to obtain your Certificate of Deposit, the bank may be forced to adhere to strict secrecy laws which protect your money from creditors and divorce. Also, since offshore banks are outside the jurisdiction of domestic courts those wishing to sequester your funds for whatever reason will be unable to do so.

INSURANCE ON OFFSHORE BANK ACCOUNT CD

Unlike domestic banks, an offshore bank cannot offer Certificates of Deposit which are FDIC insured. Rather, these banks have their own methods of insuring investment money which guarantee that at any given time the bank has enough money in its reserves to cover all deposits made.

For example, in Panama all banks are required to report each month to the BNP (Banco Nacional do Panama) to ensure they have enough reserves to cover deposits made. Compliance officers are assigned to the banks to make sure depositor's funds are not misappropriated. Additionally, offshore banks will often maintain large insurance policies to cover depositor's funds for amounts over what is normally covered by the BNP.

EURODOLLAR CERTIFICATES OF DEPOSIT

Eurodollar Certificates of Deposit are issued in London according to the rates listed on the London Interbank Offered Rate (LIBOR). This interest rate is calculated on a daily basis by the British Banker's Association. Several countries that rely on LIBOR for calculating the rates for Certificates of Deposit are England, the United States, Switzerland, and Canada. Eurodollar Certificates of Deposit, while being issued outside the United States, are still denominated in American currency.

When choosing to open an International Certificate of Deposit, it is important to consult with a financial advisor. Your advisor will be aware of minimum deposits required to open the account, any penalties for withdrawing money early, the stability of the bank you choose to invest with, and the denomination your money will be kept in. Your advisor will also help you choose the appropriate length of time to keep your money tied up in a CD to offer you the best return of investment.

author bio - Rocco Beatrice, CPA, MST, MBA

award-winning estate planning, trust expert

MS - Taxation, Master of Science Taxation

MBA - Management / Taxation

BSBA - Management / Accounting

CPA - Certified Public Accountant

-----

Irrevocable Trust Asset Protection, Estate Planning

International Bank of Commerce

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Certificate of Deposit (CD) Basics

Certificate of deposits are great ways to save money and make a little profit from interest. Many financial advisors will suggest certificate of deposits as an alternative to a traditional savings accounts.




Certificate of Deposit (CD) Basics

"Never be frightened to take a profit. Better in your pocket then theirs." -Michael Levy

Certificate of deposits are great ways to save money and make a little profit from interest. Many financial advisors will suggest certificate of deposits as an alternative to a traditional savings accounts. Certificates of deposits (CDs) can be purchased from a brokerage firm, credit union, bank, or savings and loan institution. When purchasing a CD you are agreeing to leave a set amount of money with the bank for a set period of time. In return, the financial institution will pay you interest on that money and when the CD matures you will get your initial money back and small profit. There are many different types of certificates of deposits. Below is some basic information about CDs and some guidelines for choosing the right investment.

A key factor in determining which CD is right for you is the minimum deposit required to open up a CD. To receive the banks increased interest rate you must deposit at least the minimum deposit amount into the account. While most lending institutions offer affordable CDs for the average consumer, there are organizations which require thousands of dollars to open up a CD. Make sure you shop around and find a minimum deposit amount that works for you.

Another factor which can influence your CD choice is maturity length. Maturity length refers to how long you will have to keep your money in the CD. Maturity length can vary from just one month through 48 months. Many banks offer flexible maturity lengths. This allows the investor to open a CD at a maturity length of one month and then decide, after that month has past, to keep it in the CD for an additional length of time. The longer the maturity period the more profit you are going to receive from the account. However, if you need to access that money early you will have to pay early withdrawal fees which can be fairly pricey. The interest paid on a CD can also vary. Be sure to ask your savings institution when interest will be applied. It can be compounded yearly, twice a year, four times a year, monthly, and even every day.

There are also several ways you will receive your interest payments. You have it deposited directly into your CD account and it will continue to receive interest like the rest of your CD. You can have the interest payment mailed to your home or deposited into a checking or savings account. Certificates of deposits are great options for people looking for a stable and consistent growth in their money. The main concern with CDs is liquidity. If you are interested in opening up a CD account speak with your local bank or contact a financial advisor.

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Lock in a Rate of Return With a Certificate of Deposit

Rates on bank accounts, such as checking and savings accounts, have been falling. Want to make sure that your interest rate won't get cut by the bank anymore? Lock-in a rate now with a Certificate of Deposit.




Lock <<</a>/a>/a>in a Rate of Return With a Certificate of Deposit

If you have a bank savings account, you've probably noticed that the interest rate on the account has been steadily decreasing. Do you want to make sure that your rate won't get cut by the bank anymore? Lock-in an interest rate with a Certificate of Deposit.

The CD (short for Certificate of Deposit) is a bank product that gives savers a fixed rate of return for a specific period of time. That means no surprise rate cuts. The rate you get the day you deposit your funds will be the rate you earn for the entire term of the CD.

During the term of the CD, you can't access your principal (the amount you deposited) without incurring a penalty, but you get rewarded for the lack of access with a bigger interest rate than on a savings accounts.

How long the CD term runs is up to you. You can choose a term as short as three months or as long as ten years. In many cases, the longer the term of the CD, the higher the interest rate you get - but this isn't always the case. A bank may need a quick infusion of deposits and may offer a special high rate on a short term CD.

When the CD matures, banks will give you a grace period to close the CD account and withdraw your money.

During the grace period, you can choose not to close the CD and even add money to the account. In this case, at the end of the grace period, the bank will "roll over" your CD for the same time period as before, but at the then current rate which could be lower or higher then the original rate. It's like opening a new CD without having to re-apply.

Besides the "regular" CD described above, you may encounter some other types of CD accounts. The concept is the same, but there may be a few extra perks. For instance, you may come across a "Penalty-free Withdrawal CD." This CD will allow a depositor to withdraw funds a certain amount of times before the CD matures without penalty. The obvious benefit to this CD is that if you need some of the money before the CD matures, you'll get fee-free access to it. The drawback is that usually the interest rate on this type of CD is lower than in a normal CD with a comparable term to maturity.

Where can you get a CD? Certificates of Deposit are offered at most local banks and credit unions. But don't neglect to check the rates at online banks. Many online banks (also called Internet banks) can offer higher CD rates because they have lower overhead expenses than a local brick-and-mortar bank.

Visit eMoneyCentral.com to get daily updates on the highest CD rates available at online banks.

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How to Search for the Best Certificate Deposit Interest Rate?

Second, Look inside of the bank your currently are doing business with. Your banking institution may offer varying interest rates based upon the amount of monies within a CD. It may be more beneficial for you to combine two or more certificates of deposit into one larger CD to receive the higher interest rate.





How to Search for the Best Certificate Deposit Interest Rate?

Everyone wants to earn money as easily as possible. One of the easiest ways of acquiring new funds is to shop around for the best certificate deposit interest rate available. In order to ensure that you are getting the best deal possible you need to do the following:

First, check your current certificate deposit interest rate as well as the time length on that rate.

Second, Look inside of the bank your currently are doing business with. Your banking institution may offer varying interest rates based upon the amount of monies within a CD. It may be more beneficial for you to combine two or more certificates of deposit into one larger CD to receive the higher interest rate.

Third, see if the term of your CD can be extended. This is an excellent way to ensure that a great rate you have continues for a longer duration of time or to secure a higher certificate deposit interest rate because you are investing more over a longer period of time and bumping you up to the next interest tier level.

Of course, profit margins are getting the best from your current institution can do that case, please refer to the time banks and other financial institutions can offer you or around the shop. Like any other profession, the banking industry is a business and they need customers to survive. Compare what another bank can do for you using the rates of your current bank. Ask questions and see what this new bank can offer you that are positive to the restructuring of your assets. A little bit of investigating could easily ensure that your CD interest rate will be increased.

Before you make any moves with your money, you need to consider banking regulations and whether changes to your CD will incur penalties if you decide to roll them over when the CD comes up for renewal. If it is more advantageous to incur a small withdrawal fee in order to acquire a CD with greater interest payouts to you, you have to do what is in your best financial interests, even if it costs a little to make much more.

When looking for information related to interest rates, don't just focus on one source but do a little bit more research so that you are aware of various perspectives. In this information age we live on, there's a lot of valuable input you can find on any subject so take your time to find out what you need. Because of this, we have gathered some information for you to save you some time since research is always difficult. Yet without proper research there is no way to acquire the material you need to understand. Please see below for more information on Certificate Deposit Interest Rate.

For more information on Certificate Deposit Interest Rates or visit http://www.interestratespro.com/Articles/Certificate_Deposit_Interest_Rate.php, a popular website that offers information on Interest Rates. Please leave the links intact if you wish to reprint this article. Thanks

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