Most important facts about brokerage CDs
While we save, what is most important to us is to see our savings double at the earliest. Investing in CDs is one of the best ways to boost the growth of your savings. There are many different CDs that you will see people talking about. One such CD is the brokerage CD. As the name goes, you will see a financial intermediary in picture when you talk of brokerage CD. These intermediaries act like brokers who scan the marketplace and diversify our savings.
While your CD remains deposited under a single umbrella, you will actually be able to buy brokered CDs of various banks under it. This means you get the CDs for the best rates, thanks to the brokers, but you will not have to worry about the bookkeeping. The fact that they are all in one place is an assurance of better tracking and easy maintenance.
You think you have planned well before you make investments, but that is only till you have an unplanned expense round the corner. Emergencies are hardly foreseen and there is nothing much we can do about it. It is at such situations that we will want to pull out our money but many CDs have associated penalties if you have to withdraw them before the agreed period. You face no such problem with brokerage CDs since they have no associated withdrawal penalty. The only hitch is that if the market value for your brokered CD is less compared to the price at which you have bought, it will amount to a loss.
The fact that your brokerage firm will buy CDs from various sources at the best price is enough to assure you that there will be minimal losses at any point of time. The risk would be much higher if you remained invested with just one CD which fluctuates under market conditions. With brokerage CDs, your losses can be nullified with profits since you have various CDs from various banks with different levels of performance to their credit.
Many a times, brokerage CDs are categorized as callable. This is because the banks that issue the CDs can call them back at any point of time based on the interest rates. If you have bought them at a rate which is much higher than the interest rates offered currently, the bank has the liberty to call the CD even before its maturity date.
Do your bit in knowing about your broker before you get into buying CDs through them. There are many people out there wanting to make easy money, so you may seem like a soft target to the fraudsters if you instantly trust them. Go by reviews about them, their experience in the field and you will be able to judge their credibility.
One fact that you must be aware of is that it is easier to reach the money you have in the bank, but that is not the case with brokerage CDs. It is necessary to plan your expenses with a buffer that can come to your rescue even in case of delays.