Market Indexed CD’s

Many investors look for opportunities to participate in the appreciation of a rising equity market while limiting their exposure to market downturns. For those investors, a traditional Certificate of Deposit with the long-term growth potential offered by the market, may be the right approach.   These vehicles are called Marked Indexed or Marked Linked CD’s.

Performance Financial maintains a strategic partnership with the single largest issuer of Market Indexed/Linked CD’s in the country.   Below are the 6 main characteristics of these instruments:

  • Full Principal Guarantee – 100% Principal Protection by the highest possible credit rated bank in the country.
  • FDIC Insurance - Market Linked CDs are insured by the Federal Deposit Insurance Corporation (FDIC) up to a maximum of $100,000 per depositor, subject to FDIC rules and decisions.
  • Growth Potential – the investor’s rate of return is linked to popular equity indices, such as the S&P 500 or the Dow Jones Industrial Average. The bank may also separately offer a CD linked to an inflation benchmark such as the Consumer Price Index (CPI).
  • Interest -   A Market Linked CD tied to the equity market will generally pay interest only at maturity based on the performance of the underlying index, instead of periodic interest payments.   At times, an equity based Market Linked CD may offer a guaranteed minimum rate of return at maturity with the opportunity to earn a greater return linked to the performance of a rising equity market.
  • Taxation - Taxable accounts are required to report taxable income each year, accrued at the Original Issuer Discount Tax Rate, even though they may not receive an interest payment until maturity. Generally, tax-exempt entities and IRA accounts will not have to pay taxes.
  • Risks - Market Linked CDs are subject to inherent risks such as market risk and liquidity risk. Investors may be unable to sell their Market Linked CD prior to maturity and, should an investor sell their Market Linked CD prior to maturity, they may receive more or less than the original investment.