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Advantages of an Index Linked CD?

Thursday, April 29, 2010 - 7:07 PM
An index linked certificate of deposit is a special type of CD in which the upside performance is linked with some type of stock or commodity index. However, the principal is typically guaranteed and is FDIC insured. The Finance Buff has a very good analysis of this type of CD. Here's an interesting conclusion:
If you try to match the downside protection by putting a large percentage of the money in a plain vanilla CD, you won’t be able to match the upside potential of an index linked CD. If you try to match the upside potential, you leave the downside exposed.
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Ken TuminKen Tumin5,469 posts since
Nov 29, 2009
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