CDs with fixed yields are not risky

Dear Dr. Don,
I read your advice on "structured CDs" and am confused by it. Are you saying that all CDs bought at a bank have that kind of risk?
-- Safe Bettye

Dear Bettye,
To bring other readers up to speed, you're referencing an earlier column titled "Structured CD can be poor investment," where that reader asked me to "please comment on investing in structured CDs and what the risks are."

I am not saying that all CDs have the kind of risk inherent in a structured CD. If you're buying CDs with a fixed yield over the deposit term, you're not buying a structured product.

Deposits insured by the Federal Deposit Insurance Corp. are backed by the full faith and credit of the U.S. government, as are shares held at a credit union insured by the National Credit Union Share Insurance Fund.

Structured products can also be FDIC-insured. The difference is that the yield on a structured product CD is based on the return of some other asset, subject to the provisions of the CD agreement.

The yield on a structured CD typically fluctuates but may have both a floor, guaranteeing a minimum yield, and a cap, stating the maximum yield.