<span><b>MARKET-LINKED CD</b></span>


A Market-Linked CD or ‘MLCD’ is a FDIC-insured certificate of deposit (CD) which allows investors the potential to participate in market gains while protecting their principal investment. Upside returns are linked to the performance of an underlying asset(s), such as an equity index, stock, currency, commodity, or Exchange Traded Fund (ETF). 

It is important to highlight MLCDs are intended to be held to maturity and only guarantee full return of principal at maturity. If an investor sells or redeems their investment prior to maturity, they may receive a return less than their original investment.

Market-Linked CDs are considered complex investments and may not be suitable for all investors. 

Market-Linked CDs

from world leading financial institutions  

Type of Accounts

Individual, Joint, Trust, IRA, SEP-IRA, SIMPLE-IRA, Corporate 

Key Features

    • Minimum investment is $25,000
    • Terms generally range from 1 to 7 years
    • FDIC-insured 

A MLCD represents a bank deposit obligation and amounts of principal and any accrued interest are FDIC-insured up to $250,000 per depositor, if held to maturity. FDIC deposit insurance coverage limits are based on the total of all deposits an account holder (or holders) has at each FDIC-insured bank. Additional information, including applicable limits, is on the FDIC public website at www.fdic.gov.

100% principal protection 

When purchased at par and held to maturity, the investor will generally receive their full principal investment, even if the performance of the underlying asset is negative, subject to the creditworthiness of the issuer. It is important to highlight principal protection is only provided where CDs are held to maturity and not where CDs are sold or redeemed prior to maturity.

Upside market participation 

Returns are tied to the performance of the underlying asset. MLCDs can offer point-to-point, or 100% participation, in the positive performance of the underlying asset (sometimes more/less) and may cap returns depending on the terms of the MLCD.

Estate feature 

Many MLCDs offer an estate feature. In the event of death, the estate may be entitled to receive 100% of the principal amount of the CD before maturity. The estate feature is subject to conditions and limitations established by individual issuer; the disclosure statement and applicable offering documents should be read carefully to understand these terms.

No dividends 

Dividends paid by the underlying asset are not passed through to the investor.

How Market-Linked CDs may fit in portfolios

For investors who understand the risks associated with the individual structured CD, Market-Linked CDs can complement a balanced portfolio strategy while offering the potential to realize enhanced returns in comparison to traditional savings or deposit accounts.

There are a variety of MLCD structures which can allow investors the potential to:

  • Capitalize on a market view (bullish, bearish, or market neutral)
  • Complement an investment objective (conservative, moderate, or aggressive)
  • Mitigate risk in a portfolio
  • Gain exposure to a specific asset class or sector which may otherwise be difficult to access through direct investment 

While MLCDs may not be suitable for all investors, they can be an attractive investment choice for those looking to preserve capital and limit downside risk, without sacrificing the ability to participate in upside market movements. Young families, conservative investors, individuals saving for college, baby boomers, and retirees are examples of those who may choose to address these objectives using MLCDs. 

Tax Considerations

There are important tax considerations related to Market-Linked CDs, both during the term of the product and at maturity. For tax purposes, MLCD returns are generally considered interest income and are typically taxed at the holder’s ordinary income tax rate.

Neither AAM, nor its affiliates and employees, provide tax advice and investors should consult their tax advisor before investing in any Structured Product.

Statement Value Considerations

The statement value of a MLCD will differ from traditional investments and will most likely be lower than the original principal amount invested on day one. Statement values are an estimate of the current market value of the MLCD and are affected by a variety of factors, including performance of the underlying asset, interest rate movements, market values, and time remaining until maturity. Statement values do not reflect principal or payments which will be made at maturity.

Generally, the closer to maturity a MLCD is, the more the underlying asset performance and amounts due at maturity will be reflected in the statement value. The more time left to maturity, the more sensitive statement values may be to market fluctuations and other factors.

See if you qualify for a Market-Linked CD!


Call risk: Some Market-Linked CDs may be redeemed by the issuer prior to the scheduled maturity which can adversely affect an investor’s return; an investor might be unable to reinvest the proceeds at a similar return if this occurs.

Credit risk: While MLCDs are FDIC-insured up to applicable limits, the issuer’s creditworthiness is an important consideration, particularly for MLCD investments above the FDIC insurance limits.

Inflation risk: Even with 100% principal protection, a MLCD’s maturity value may be less than the inflation-adjusted original investment.

Liquidity: Market-Linked CDs are generally not traded on any exchange, or may be only thinly traded, and can be difficult to price. Due to the lack of liquidity, the market price of MLCDs may be significantly discounted if redeemed prior to maturity. MLCDs should be considered buy-and-hold investments. The lack of a liquid secondary market makes MLCDs inappropriate for investors who may not be able to hold them to maturity.

Market risk: Volatility and other market forces can affect the value of the asset underlying the growth component, both during the term of the Market-Linked CD and at maturity, and this can affect return. Historical performance of the underlying asset class is no guarantee of future performance.

Participation risk: Some MLCDs limit participation in any appreciation of the underlying asset, capping potential return. In addition, even if the underlying asset is linked to equities, investors will not receive any dividend income.

Payout considerations: Market-Linked CDs may pay an interest or coupon rate substantially above or below the prevailing market rate. MLCDs may also cap or limit upside participation in the performance of the underlying asset, particularly if the security pays an above-market rate of interest. Additionally, the underlying asset may under-perform which could negatively impact the payout. Other factors which may affect the investment value of a MLCD include interest rates, volatility of the underlying asset, liquidity, and time remaining until maturity.

Risk Considerations

The information contained herein is not intended to be a complete description of the statement valuations, terms, risks, and benefits associated with any specific Market-Linked CD (MLCD) offering.

Market-Linked CDs (MLCDs) may not be suitable for all investors and are made available through an offering document, or disclosure statement. These documents contain a detailed explanation of the risks, tax treatment, and other relevant information about the investment. Before investing, you should read the disclosure statement and other supporting documents carefully. Additionally, investors should consult their accounting, legal, or tax advisors before investing. 

It is important to highlight Market-Linked CDs only guarantee principal back at maturity and thus if an investor sells or redeems his/her investment prior to maturity, the investor may receive an amount less than his/her original investment. There may be substantial penalties for an early withdrawal. Typically, the issuer of the MLCD maintains a secondary market; however, they are not obligated to do so.

The content of this page is for informational purposes only and does not pertain to any product or service and is not an offer or solicitation of an offer to buy or sell any product or service. 

Unless otherwise stated, all information and opinion contained on this site was produced by Advisors Asset Management, Inc. (AAM) and other sources believed by AAM to be accurate and reliable. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on individual investment objectives and suitability specifications. All AAM employees, including research associates, receive compensation based in part upon the overall performance of the firm. AAM may make a market in or have other financial interests in any given security with which this analysis suggests may benefit from its conclusions. Investors should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this publication and should understand that statements regarding future prospects may not be realized. Past performance does not guarantee future performance. All expressions of opinions are subject to change without notice.