Index-Linked Certificate Of Deposit

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DEFINITION of 'Index-Linked Certificate Of Deposit'

A certificate of deposit (CD) with a return based on a specific index. These CDs are purchased for a fixed price. There is a chance for a high return, depending on the outcome of the index, and there is no risk of a loss as the CD is FDIC insured.

BREAKING DOWN 'Index-Linked Certificate Of Deposit'

While these CDs offer a potentially higher return than many other variations, they are not the safest investment. Even though the initial investment will never be lost, there may be no return on the index. If you are looking for guaranteed future income, a traditional CD may be a better choice for you.

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RELATED FAQS
  1. What is considered a good interest rate for a certificate of deposit (CD)?

    When interest rates are very low, it's difficult to find a single certificate of deposit (CD) offering a significantly higher ... Read Full Answer >>
  2. What is the difference between a demand deposit and a term deposit?

    Demand deposits and term deposits differ in terms of accessibility or liquidity, and in the amount of interest that can be ... Read Full Answer >>
  3. Other than my savings account, what other types of holdings compound my interest?

    Investors and savers can use the power of compounding interest to accumulate wealth over time. Unlike simple interest that ... Read Full Answer >>
  4. How often is interest compounded?

    Interest can be compounded on any given frequency schedule. Common interest compounding time frames are daily, monthly, semi-annually ... Read Full Answer >>
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    For the majority of younger investors, taking on risk within a portfolio in return for higher returns is the norm. Because ... Read Full Answer >>

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