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Equity Linked CDs for the Indecisive

According to “Alternatives for the Undecided,” by Serge Troyanovsky of Financial Planning, equity linked CDs can be looked at as a sort of happy medium.  Many investors just cannot decide between risky investments with potentially high returns and safe investments that lose out in bullish markets.  A middle ground between the two is an equity linked certificate of deposit.  These products are issued by banks and return all of your initial investment once they mature.  FDIC insurance up to $100,000 draws in even more investors.  The banks issuing the most equity linked CDs are Wachovia Bank, Morgan Stanley, Merrill Lynch Bank, Wells Fargo, Bank of America, HSBC Bank USA, LaSalle, and JP Morgan.  Wells Fargo’s WISE Indexed CD has great qualities to offer investors.

You receive your interest as a return that is paid once your equity linked CD matures.  Different products compute the return differently, but they are traditionally linked to the well-known domestic equity indexes like the S & P 500.  When you compare equity linked CDs, most offer a minimum return between 1% and 3% that you’ll receive even if the markets perform poorly.  These products are meant to be held until maturity, so if you are looking for an investment that is liquid before maturity they probably wouldn’t be right for you.  As banks continue to sell an increasing number of equity linked CDs and investors seek this safe alternative out, a greater number of options will become available through innovation.

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