Hello Again – Years ago I used to buy a lot of Brokered CDs and bonds for client accts, but when the Fed pushed rates down close to zero, that pretty much turned things off. But, it appears this market is coming back again. I have noticed that Brokered CD rates are getting attractive again. So what is a Brokered CD?
Banks from around the country offer their CDs (Certificates of Deposit) through brokerage firms. They are much like bank CDs but they can be bought and sold at any time. We like to buy them and keep them to maturity, but if you had to sell them back early you could, although, if you do that, you may get back more or less than what you invested. If you hold them to maturity however you will get back the face value.
Are they FDIC insured? Yes they are. Up to $250k per bank. In fact, you can buy $250k from one bank, and another $250k from another bank, and so on and all of it is FDIC insured. This easily expands the limits of your coverage all right within your brokerage acct and with the help of your advisor.
Here are some rates that were available this morning:
1 Yr CD 4.25%,
2 yr CD 4.50%,
3 yr CD 4.65%
These rates can and will change. Keep in mind, that’s the stated return if they are bought and held to maturity, but these are brokerage firms. That means they are treated as an investment holding in your account and the rate is reduced by the advisory fee we apply to your account. Some advisors will charge a commission. We do NOT. Because we are a fee only fiduciary here, we never ever charge commission, but we do charge a fee, and the fee rate is dependent on the amount of money in the acct, and that fee has to be backed out of the gross yield above. So take the yield above and subtract the annual fee rate. That would be your actual rate. That’s what you need to know…..what the net return is to you after the fee.
How long will these rates last? No idea. Heck, CD rates could go higher or lower, nobody knows. But, we are starting to use them where it seems appropriate. Call or email me to learn more about these brokered CDs and or the rates available.
Best Regards,
Mike
