A friend just came back from the bank and told me about a new financial product that a rep was pushing on her. Supposedly, it’s a 5 year CD that is FDIC insured that is indexed to the DJIA. The rep told her that the maximum return could be upto 43%. If the Dow goes down, she would loose nothing! The only cost would be the opportunity cost of having the money elsewhere. I gave her my opinion. I want to hear yours now.
JP
It sounds too good to be true. Why not just buy an ETF that mimicks the Dow? I think the symbol is DJN…(or something like that). If she’s confident the Dow will increase over the next 5 yrs., she’d do better just buying that ETF.
It does sound too good to be true. That was my point. If it were true, that would mean the US government would be insuring the Stock Market. Why do an ETF when this has no downside? These banks are under pressure to raise capitol and I think this guy is lying.
JP
That reminds me of Millenium (?) bank. They were offering CDs with a return of 8%. But the bank was “offshore” in the Caribean and of course not FDIC insured :shocked
The whole point of purchasing the CD is on premise that the Dow will go up. If she thinks the Dow will go up, buying an ETF will eliminate the middle man. If she thinks it will go down or stay flat, she might as well put the money in a MM or a fixed rate CD.