For the past two decades, Structured Investments have creeped into the spotlight as an alternative for investors seeking certainty of return. The next to nothing returns of many traditional conservative investments have left something to be desired. Now investors are looking elsewhere: They’re looking at Structured CD’s.

What is a Structured CD?

A structured CD is a vehicle whose rate of return is based on the performance of underlying assets, such as a basket of securities, an index, a commodity, a debt issuance or a foreign security. Structured CDs have a fixed maturity date and are designed to offer specific risk-return tradeoffs. For the purpose of this discussion, we will focus on “Principal Protected Market-Linked Certificates of Deposit,” aka Market-Linked CD. A market-linked CD is a bank deposit product with returns tied to an underlying asset type. Here are a few facts about them:

  1. Upside potential linked to the underlying asset.
  2. Variable and personalized terms based on your timeline requirements.
  3. 100% principal protection if held to maturity.
  4. FDIC Insured.
  5. Limited Liquidity: Early surrender may result in los of principal invested.
  6. Calculation Risk: There may be significant discrepanciesbetween the return of the underlying asset and the return of the market linked cd. Participation rates and caps may vary.
  7. Opportunity Cost: There may be limited upside potential and investing in market linked CDs may not realize expected returns
  8. Market linked CD can have unique tax implications; consult your tax advisor before investing.

Who Should Invest in a Market-linked CD?

Investors come in all shapes and sizes. In other words, market-linked CD’s are not for one type of investor versus another. The investor profile is broad and can include anyone: younger or older individuals, pre-retirees and retirees, baby boomers, those saving for education, pension funds, etc. Candidates are those that value principal preservation with upside potential. It’s always important to understand the risks involved when you’re investing. Market-linked CDs have limited liquidity before they mature which means there may be a loss of principal for an early surrender.

If you are curious to learn more, please reach out to Valley Oak Wealth Management at 415-898-4439 or We have advisors who are more than happy to help you figure out if it’s right for you.

Returns are not guaranteed and principal is only guaranteed when held to maturity. Stock market CDs possess inherent risks, such as market and liquidity risks. If purchasers sell their CDs prior to maturity, they may receive more or less than their original investment. Past performance of any indices is not a predictor of future results. CD returns may not track full performance of the indices themselves. May not be suitable for all investors. Investors should carefully read the related term sheet and prospectus and/or disclosure statement before investing. Structured product CDs may be treated differently than traditional CDs for tax purposes and investors should consult their tax advisors.

Structured products typically have two components; a note and a derivative
and a fixed maturity. They are complicated investments intended for a “buy and hold” strategy and
offer protection from downside risk in exchange for forgoing some upside potential to achieve that
protection. Principal protection may vary from partial to 100 percent. Investing in structured notes is
not equivalent to investing directly in the underlying securities or index and carry risks such as loss
of principal and the possibility that you may own the referenced asset at a lower price, due to
economic and market factors that my either offset or magnify each other. At maturity, if the
derivative turns out to be valuable, the investor can gain exposure to the upside of that index.