Flexible investment option in the form of brokered CDs

Brokered CDs are certificates of deposits which are sold by brokers, who in turn buy the CDs from the banks. Because these are sold by brokers, often they are available for attractive interest rates. Brokered CDs give a wide selection to the investors, since CDs from a large number of banks may be available from a single broker. Buying CDs from a single bank often limits the choices to CDs available in that particular bank, and the interest rates are not available for comparison. But brokered CDs are comparable, and the best CD offering the best interest rates can be chosen by the investor.

Brokered CDs can be sold in a secondary market, but they might not get a very high value in the secondary market. Buying the CD from a reputed and a high rated bank will ensure that the CDs get a good value when sold in the secondary market. Finding the right brokers requires some research and careful consideration. Financial advisors will be able to get a good deal on the brokered CDs for their clients. If investing in the brokered CD, the costs of the investments depend upon the amount that the brokers want to make for the deal. It is typically a flat fee, which the broker will have to pay in order to book the investment. Also, they might charge a service charge per investment or for every thousand dollars invested. But brokered CDs are worth the investment because the broker does all the work of finding out the best paying CDs, dealing with the seller, investing on the chosen CD, and also reinvesting. Closing the brokered CDs does not cost any penalties, unlike banks. In banks usually, CDs cannot be foreclosed before their maturity period. But brokered CDs can be closed or sold in the secondary market, which means they offer greater flexibility.

The biggest disadvantage of the brokered CDs is the risk of low value in the secondary market. Usually, holding onto the investment until the maturity does not pose any threat. But in the unlikely event of instability in the market, the investment might be lost completely. Brokered CDs can be FDIC insured, to avoid such situations. FDIC insured CDs get better rates in the secondary market too, since they have the security. Brokered CDs work the best when the interest rates in the market fall from the original value at which the CD was bought. The brokered CDs can then be sold in the secondary market for a profit.