Can you lose money on a brokered CD?
There's potential risk of losing value if you're selling brokered CDs instead of waiting for them to mature. An early withdrawal penalty tends to be several months' worth of interest, or more.
Are brokered CDs a good idea?
Brokered CDs typically yield more than regular CDs because they are in a more competitive market. Brokered CDs generally offer much more flexibility than traditional bank CDs. The flexibility of brokered CDs can make it easier for investors to make mistakes, so read the fine print.
Do brokered CDs automatically renew?
Also, CDs that are brokered generally don't automatically roll over into another CD, although some brokerages do allow for this option. Once they mature, the principal will be deposited into your general investing account, and you must choose what to do with it next.
Is a brokered CD a security?
Although brokered CDs may have certain features that traditional CDs do not have, it is important to remember that, as long as a banking institution issues the brokered CDs, sets all of their features, and FDIC insurance applies to them, brokered CDs are generally considered bank products, not securities.