Are you looking for attractive yields on certificates of deposits? Look no further than some of the biggest banks in the U.S. JPMorgan, Goldman Sachs, Morgan Stanley, and Bank of America are all offering one-year CDs with yields of at least 5% through brokerage firms like Fidelity, Schwab, and Vanguard.
Brokered CDs, as they are known, offer a wide range of issuer options compared to traditional bank CDs. This can potentially provide an opportunity to earn additional yield. With over 180 different brokered CDs available at different maturities, buyers have plenty of options to choose from.
However, it’s important to note some key differences between brokered CDs and traditional CDs. For example, brokered CDs may be callable, meaning the issuing institution can call the CD before its maturity date. This could result in earning interest for a shorter period than expected.
When considering buying a CD, whether from a bank or a brokerage firm, it’s crucial to understand your time frame. Bank CDs may have penalties for early withdrawal, while brokered CDs may require selling on the secondary market, potentially resulting in a loss of principal.
Despite these differences, brokered CDs offer convenience for investors who already have accounts at a specific brokerage firm. They also allow investors to easily build a CD ladder, which staggers maturities to hedge against uncertainty in interest rates.
If you’re interested in building a CD ladder, consider different maturity options based on your time frame. Whether it’s a one-year ladder with CD maturities three months apart or a five-year ladder with maturities one year apart, a CD ladder can help you manage risk and maximize your investment potential.
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