Brokered CDs reduce some risks, raise others

Don TaylorQuestionDear Dr. Don,
Who can I see locally, other than our bank, to provide me the ability to purchase (from any bank in the United States) CDs with the highest CD rates available? I also want to be assured I'm not taking risks with bad banks or institutions.
-- Ritchie Reconnoiter

AnswerDear Ritchie,
You could talk to your stockbroker and ask him or her about investing in brokered CDs. There are some plusses and minuses to taking this approach.

A brokered CD is a negotiable instrument, meaning it can be bought or sold. That eliminates the worry of an early withdrawal penalty but replaces it with some risk to principal since the value of the CD is based on current market interest rates.

Trading the CD can involve a profit or a loss. If the CD is held to term, of course, there is no risk to principal for CDs insured by the Federal Deposit Insurance Corp. or the National Credit Union Share Insurance Fund. The Bankrate feature "Brokered CDs easy route to higher CD rates" provides a nice primer on the topic.

Before you commit, check on rates using Bankrate's "Rate Search" feature and looking for the highest nationally available rates. You can also use Bankrate's Safe & Sound Star Ratings.

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