I have a portion of savings in bank CDs. While looking for higher rates, I find brokered CD's that seem to have higher rates, so I am guessing there is more risk involved. Somehow. I am assuming that greater risk comes by the way of selling before maturity with potential loss of principal. If I find a brokered CD that is FDIC insured, is not callable and assuming I hold it until maturity, is there a greater risk with brokered CDs vs Bank CDs? If the risk is the same in the above example, and also the idea of thinking about NOT having all eggs in one basket, should I be concerned about having too much percentage of money in one online brokerage account (in stocks, funds, CDs) and not at a local (or not local) bank? Thanks!
I'm not sure, but it may not be that there are more risks. Instead, it could be that the broker has lower costs so he can pay you more while maintaining the same margin as the bank.
Thanks. I can imagine competition and lower overhead are reasons a brokered CD offers higher rates. But, if the risk is similar in comparison, I would guess bank CD rates would go up as more people would move to a brokered CD leaving less buyers of a bank CD. No?
