Tips on buying CD's

Recently I have had some clients ask me what’s the difference between buying a CD from a bank or one from a broker? Here are some helpful hints;
Unlike a Certificate of Deposit that is bought directly from a bank; a brokered CD is sold by stock brokers (and others). And unlike a bank-bought CD, a brokered CD is marketable on a secondary market. It is FDIC insured up to $100,000 and it is often marketed as a suitable alternative to Treasury issues.
Because these are marketable securities it is important to go farther than yield; another words don’t just be a yield hog.
1. Remember like other fixed income investments if interest rates go up, the market value of these securities may go down. That is elementary to anyone who has ever been interested in fixed-income investments.
2. Check the rating of the bank. This can be done without cost at either of the following rating agencies (it's best to check both, in case there is a discrepancy):
bauerfinancial.com
bankrate.com
3. Check the value of a similar issue on the secondary market. Higher rated Bank’s CD’s trade stronger and lower rated banks trade weaker. That means that if you want to sell the CD before its maturity, which you can, CD’s from Banks that have lower ratings often trade below what they were bought at. This could create a loss for the investor.
4. Check the secondary market, as an alternative to new issues, if the secondary-market value is less than par. That may result in a good deal for you. For instance, an issue with a coupon rate of 4.15%, if it sells on the secondary market for 93.5, will yield 4.98%.
5. Remember a broker has hundreds of CD’s to chose from so it is very important for the prospective buyer to as forth coming and truthful about their needs as possible so that the best alternative can be found.
Call me for a CD QUOTE today
James Foytlin
Independent Investment Representative
Horwitz & Associates
54 Washington Place
Ridgewood NJ 07450
1(888)599-1188 or (201)652-3003