So, what do you folks think of structured CDs?

[eridani]

My credit union gave a seminar on them. These are products that are linked to various asset classes but protected by FDIC up to $250K, with the caveat that you must wait until maturity to get back all your pricipal or else risk losing some of it. They remind me a lot of annuities which can be linked to the stock market with guaranteed protection of principle (or if you prefer choose the lower but guaranteed return), only with shorter maturities. Some have annual payouts; most make you wait until maturity to get the payout. All have caps, which is the tradeoff for reduced risk. Some guarantee minimum returns, as in the product below.

Structured Investment Solutions
Union Bank 3.5yr Market Linked CD Linked to Russell 2000 Index

Primary Objective: Principal Protection
Asset Type: Equity
Settlement Date: 07/28/2011
Maturity Date: 01/28/2015

Denomination: $1,000.00
Calculation Method: Point to Point
Order Period Ends: 07/25/2011
Period Ends Time: 12:00 PM ET

Features


Veribanc Rating Green/***/B effective as of 2/25/2011

Website Link to Veribanc Track Record Link to Veribanc Rating Description Please contact VERIBANC, 800-837-4226, to determine if this is the most recent rating or go to www.veribanc.com

Offered 100.0000

CUSIP 90521AGG7

Underlying Asset Russell 2000 Index

Minimum Return 1.75% at Maturity
Maximum Return <12.04% - 14.95%> APY
Min/Max Cumulative Return Min 1.75%/ Max <49.00% - 63.00%>

FDIC Insurance This deposit qualifies for FDIC coverage generally up to $250,000 in aggregate for all deposits per institution for individual depositors and up to $250,000 in aggregate for all deposits per institution held in certain retirement plans and accounts, including IRAs.

Principal Protection Principal is protected when held to maturity under applicable FDIC limits.
Payment at Maturity The amount payable on each MLCD on the Maturity Date will be the Deposit Amount plus the greater of (i) the Indexed Interest Amount or (ii) the Minimum Indexed Interest Amount.

Trade Date July 25, 2011
Closing Date/Time July 25, 2011 12:00 EDT
Coupon Cap <3.50-4.50> Quarterly Cliquet
Sales Concession 1.2500%

[Sherman A1]

1. I don't really know, but

To tie your money up for 3.5 years at 1.75% doesn't sound great to me. I know that rates are incredibly low, but 1.75% doesn't match inflation at all, so you are really losing value. I would think you would do just as well stuffing it in a mattress as you lose value in either scenario. It's a matter of liquidity and how much value you can afford to lose. Might be worth looking at some mutual funds or other investments.

Just my opinion and I am not a financial advisor, don't play one on TV or stayed at a Holiday Inn last night.

[eridani]

2. I was thinking that 1.75% is more than I would ever get from regular CDs

--that I now roll over once a year. And there is the potential of 12%+ gain. I can't afford to lose any capital at my age--I'd consider mutual funds if I were 10 or 15 years younger.

[Sherman A1]

3. Everyone is in a different place with different needs

but as I am certain you know there are many mutual funds out there that are pretty solid (or as solid as things get these days). I would do some investigating before committing to this deal. You may need to hold onto the capital, but if you lose value to inflation, you are losing capital in my opinion.

[safeinOhio]

4. All the fees make mutuals suck

I've put most of my $ in high dividend utility stocks and have done great at 3 to 5 and a half % payments and steady growth on top of that.

[CountAllVotes]

6. can you name some of these high dividend utility stocks?

I am unfamiliar with them -- can you name a few of them?

Re: Mutual funds -- I tend to agree.

Even with Vanguard you see what the fees are and there are other fees too, like early liquidation fees in some cases and also annual fees if you happen to have >$10,000.00 in a specific fund. Between this and all of the other fees, you can end up paying quite a bit and you have no guarantees whatsoever. When you check the year-to-date figures, these fees, etc. are never included.

Certain people, like the elderly and those on fixed incoms have no business in the stock market. There is too much risk and people that fall into these types of categories have no way to replace the money should the stock market fall/collapse.

In any event, please let us know what you are referring to. Thank you. :)

[safeinOhio]

7. Just google "high dividend stocks"

Also ATT and Verizon pay over 5% in dividends and show growth. McDonalds pays over 3 and has steady growth. SO,4.68%. SCG, 4/92%. CPNO, 6.72%. D, 4.08%,

Look for a decent PE ratio and steady long term growth history. I buy only 1 or 2 hundred shares of any one so as not to burned too bad if one does go bad.
I'm retired and use the dividends as income. If you are younger, reinvest. Add 4 or 5% to another 10% growth and you'll beat those funds in the long run.

Caution, on those business that are paying very high rates, like 8 or 9 percent with a high PE.

[CountAllVotes]

12. this part here I do not like

Sales Concession 1.2500%

They are paying you 1.75% and charging you 1.25% sales commission. Huge :wtf: on that one ...

[CountAllVotes]

5. you'd be better off doing what I am doing

I cannot invest in the stock market either (several reasons that I shall not go into).

What I have done is buy CDs at a local credit union. The 5-year is paying a little over 2.5% and has a 3-month penalty should you decide to crack it early.

This is the best investment I can find right now and it is insured for up to $250,000.00.

You can also ladder CDs as well, but you won't get 2.5% on a 4-year or 3-year, etc. (will be less).

You might look around for something like this instead. You'd be way ahead of the game and if you crack them early, the penalty is small (i.e. -- on $10,000.00, the 3-month penalty would be about $63.00 or so or you can hold until it matures and face no penalty). I can live with that and it sure beats 1.75%.

Best of luck.

[eridani]

8. I have laddered CDs now. I've been turning them over yearly--

--hoping that rates might go up. One year rates are pretty crappy as you know. I was thinking that some risk exposure (with a guarantee of no loss of capital) might be worth it for up to 10% of my CD portfolio. I have three CDs maturing this month, and I have until July 28th to make up my mind.

[CountAllVotes]

9. same situation here

Depending on how inflation goes for the next few months, I may dump what I have into series-I savings bonds. Paying 4.6% for the next six months.

I've looked at managed payout funds and the like, all have fees and no guarantees.

Lets admit it, Ben's got folks like you and me! :grr:

[safeinOhio]

10. Also look at tax advantages.

You may pay regular tax on CDs, etc.
Dividends are taxed at a maximum of 15%. For me it is about 7%. Also on stocks held a year, you get capital gains, which should be less than what you pay on earned income.

[pscot]

11. I don't accept the idea that

at a certain age you should no longer even think about stocks. Companies like Vanguard and Fidelity offer no-load stock funds (no commissions) with very low fee structures. Vanguard pioneered the developement of index funds. You can invest in broad market indexes or industry specific sector funds. Vanguard has an intermediate treasuries fund that could serve as a foundation for any retirement portfolio, and you don't need hundreds or even 10s of thousands to get in. There are also "lifestyle" funds tailored to the needs of retirees and about to be retirees. Check it out. Safety is no bargain if inflation is eating away at your stash, and getting locked in to anything seems terrifying to me, given the volatility built into our trembling financial arrangements. There's a lot of information available about the funds of both companies. Take a look at the Vanuard site. It costs nothing and every one of their funds is on display, with graphs and charts showing long term yields. Morningstar rates all of them as well. Good luck, and don't be too cautious.

[CountAllVotes]

13. all of Vanguards funds lost money in 2008-2009

Best I can tell none of them paid a cent during this time period. They do charge fees if you do not have $10,000.00 to place in a solitary fund - $20.00 a year in fact and that does not include the expense ratio fee which I agree is low compared to other places. However, given what you invest in with them, you can get stuck with some hefty penalties, like as much as 1% for some funds that they sell. It doesn't sound like a lot but on $10,000.00 you'd be out $100.00 rather than the $62.50 I cite for cracking a 5-year CD paying 2.5% (a 3-month penalty) and that doesn't include the expense ratio fee nor the $20.00 a year fee. Adds up fast doesn't it?

That said, you could have had your money parked in a 5% CD at the time and made 10% or more at that time, not lost as much as 40% or more in the same 2 year period.
Good example here: VWELX (one of Vanguard's main retirement funds) http://finance.yahoo.com/q/bc?s=VWELX&t=5y&l=on&z=l&q=l&c=

The sad part is that CD rates are artificially low and likely won't be going up anytime soon as Bernanke butters Wall Street up to keep the reality of the financial world in hiding. I frankly believe that the DOW is way overpriced and has no business being above 7-8,000 tops.

With this belief in mind, I don't want anything to do with Wall Street nor the crooks running it. Why in the world would I trust any of them after all of the fraud and ponzi schemes we've witnessed in the past couple of years?

[Paulie]

14. Not worth it

http://bit.ly/r32mMD

You could easily ladder with treasuries via TreasuryDirect.gov and do much better, if you don't want to go with a treasury ETF from a discount broker.

Anything complicated, structured, leveraged, derivative, or a securities product sold by an insurance company is rarely a good idea.