a brokered CD?

-

 


A brokered CD is a type of CD that is bought and sold through a brokerage firm rather than being held directly with a bank or credit union. Here's how it generally works:

Brokerage firm involvement: With a brokered CD, you work with a brokerage firm that acts as an intermediary between you and various financial institutions. The brokerage firm facilitates the purchase and sale of CDs on your behalf.

CD selection: The brokerage firm offers a range of CDs from different banks and credit unions. These CDs may vary in terms of interest rates, maturity dates, and other features. You can choose the CD that suits your investment objectives.

Purchase process: When you decide to invest in a brokered CD, you place an order through your brokerage account. The brokerage firm uses its network to locate the best available CD offering for you. The CD is typically issued by a financial institution but held in "street name" by the brokerage firm.

Maturity and interest payments: Like traditional CDs, brokered CDs have a fixed maturity date, which can range from a few months to several years. At maturity, the issuing financial institution returns the principal amount you invested. In the meantime, the CD earns interest, which is usually paid periodically. The interest rate may be fixed or variable depending on the terms of the CD.

Secondary market: One key aspect of brokered CDs is their liquidity. Unlike regular CDs, which may have early withdrawal penalties if you need to access your funds before maturity, brokered CDs can be bought and sold in the secondary market. The brokerage firm can help you sell your CD to other investors if you want to exit the investment before maturity. However, the price you receive in the secondary market may be higher or lower than the original purchase price, depending on various market factors.

Here's an example to illustrate:

Let's say you want to invest in a brokered CD. You work with a brokerage firm that offers access to a wide range of CDs from different financial institutions. You decide to invest $10,000 in a brokered CD with a fixed interest rate of 3% and a maturity period of five years.

The brokerage firm helps you find a suitable CD from a bank. They purchase the CD on your behalf, and it is held in your brokerage account. Over the five-year period, the CD earns interest at the specified rate, and you receive interest payments periodically.

If you decide to sell the CD before maturity, the brokerage firm can assist in finding a buyer in the secondary market. The price at which the CD is sold may be influenced by prevailing interest rates, remaining maturity, and market demand.

It's worth noting that brokered CDs may carry additional risks compared to traditional CDs, such as fluctuations in the secondary market prices and the financial stability of the issuing institutions. It's important to carefully consider the terms and risks associated with brokered CDs and consult with a financial advisor before making any investment decisions.

Comments

Post a Comment

Popular posts from this blog

Church’s Globe-Spanning Real-Estate Empire

-
Image
  Inside the Mormon Church’s Globe-Spanning Real-Estate Empire From Guam to Cape Verde, the Church of Jesus Christ of Latter-day Saints is using the financial cushion of its $100 billion investment portfolio to go on a temple-building spree A whistleblower revealed a few years ago that the Church of Jesus Christ of Latter-day Saints had an estimated $100 billion investment portfolio, and at the time, church officials called the holdings a rainy-day account. They now say the money also has provided a financial foundation that gives the Mormon Church confidence to construct more than 100 temples, from Cape Verde to Guam, a series of stone-clad monuments exhibiting the church’s vast and expanding wealth. In Pocatello, Idaho, a city of 56,000 in the rural southeastern corner of the state, a recently constructed temple stands at 71,125 square feet. Its polished limestone flooring was quarried in Bethlehem, the biblical birthplace of Jesus, and wood for its doors was imported from the Congo
Read more

tech companies

-
Image
 Good to know. The way tech companies continue to deliver ever-faster and more capable computers is undergoing a profound change—at the atomic level. Performance gains that were for decades accomplished mostly by shrinking the individual components on microchips—often described as Moore’s Law—are now increasingly the result of materials science, which is evolving faster than it has in decades. Santa Clara-based Applied Materials, founded in 1967, a year before Intel, is the biggest of the companies that are leading the way. It’s a change born of necessity. Chip makers are bumping up against a hard limit on how tiny the elements on chips can become, as some of their features can now be measured at the scale of just a few atoms. As a result, manipulating what materials are in these tiny machines, and how they’re connected to one another, has become a primary way that engineers can continue to make them faster and more capable. Applied Materials AMAT 0.72%increase; green up pointing trian
Read more