Are you thinking of investing your money somewhere safer than the stock market? A place immune to the crazy roller-coaster ride of the market? Try a brokerage CD.
If you’re hesitant to invest in volatile markets, you may want to consider putting your money into a certificate of deposit, more commonly referred to as a CD. CDs offer decent returns on your investment, though you can’t access them before the maturity dates without being seriously penalized for it. If you put your money into a CD, you should forget about it until its maturity date arrives.
On the other hand, brokered CDs generally have no withdrawal penalties. However, brokerage CDs also offer lower returns when this is the case. It’s a trade-off between no access and higher brokered CD rates, or more liquidity and lower returns.
A brokered CD generally has no withdrawal penalties because the broker you have bought the CD from can sell it in what’s known as the secondary market. In this instance, the CD itself has not been accessed – you’ve simply instructed your broker (hence the term “brokered CD”) to sell the CD to someone else.
The CD account is still intact and you can access the money in your CD by basically handing it off to another investor. The only real downside, however, is they’re usually offered at lower brokerage CD rates than traditional CDs. As with many other kinds of CDs, you, the investor, must decide whether you want to have access to your investment at a lower rate, or do without access to your investment (until it reaches its maturity date) with a higher return at the end.
To learn more about brokered CDs, be sure to speak to a financial advisor. He or she can walk you through all the pros and cons of brokered CDs until you have a better idea of what’s best for you and your investment goals.