High
Yield FDIC Insured CDs
Most investors have "core
capital"—money that they wish to preserve
and keep in a safe place. CDs are a good place for
those funds. Since you plan to keep that money permanently,
why not park it for a high rate? You can get long term
CDs that pay much more than your local bank.
Before you pile all your money
in the truck to take advantage of the higher rates,
these high paying CDs do have some tradeoffs, so please
read on.
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These are long-term CDs. Buy
them and forget them. You can get your interest
semiannually, but the CD has a 15-year term. So,
this CD may outlive you. However, if you’re a smart
investor, you want your money to outlive you (the
consequences of you outliving your money, let’s
not even discuss). At your death, your heirs have
the option of "putting" (placing for redemption)
the CD at face value, even if the term has not expired.
-
These CDs have a call feature,
which means the bank can decide to pay you back
early. These are often named "callable CDs."
In the case of the CDs identified in the footnote,
the bank has the option to pay you back early (after
1 year) or at any 6-month interval after the first
year.
-
The CD has a step rate feature.
If the bank does not call the CD after the first
year, the interest rate may be stepped down for
the remaining term (you will know this before you
invest).
-
You have the option to sell
your CD at any time in the secondary market, however,
you could get less than you paid and there is no
assurance of a buyer for your CD.
So who are these CDs for? For
people who want to put their money in the safest place
(FDIC insured), who want a very high rate and who do
not need access to the funds. These investors will
have other funds set aside for liquidity needs and will
have adequate medical and long term care insurance so
that these funds can be left to earn a very high rate.
Rates change daily. Request
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