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Everbank Offers Diversified Metals CDs

When it comes to interesting and innovative banking products, Everbank [3] has always led the pack. With some banks you get the same vanilla options – checking, money market, savings, CDs. Reward checking [4] is rare and “exotic” CDs are even rarer (how many banks offer one of the non-standard CDs?).

Recently I received an email from them about a 5-year diversified metals CD [5]. The basic idea is that it’s a principal protected CD with a 5 year term that appreciates if the price of gold, silver and platinum increase. If there is no gain, you receive your principal back.

Investment Return

The return is a simple equation, take the arithmetic average of the twenty quarterly pricing dates for each metal and divide by the initial price of that metal. The CD will have equal exposure to each metal, so divide that value by three and sum the results. That’s the final price against which the original is compared. It’s explain in this term sheet [6].

In English, your gains are the difference between the price on July 1st, 2010 (when the CD will close) and it’s the average price of each commodity, taken every quarter for the next five years.

What’s the catch?

The catch is that your upside is maxed out at 50% of your investment. If the mix of gold, silver, and platinum appreciates beyond 50%, you don’t receive anything more than 50%. If you are maxed out at 50% across five years, that comes out to be 8.45% APY each year (the highest 5-year CDs [7] yield 3.00% APY now). You have downside protection, so you won’t lose money, but your upside is limited.

Another big difference between this MarketSafe CD and regular CDs is that you cannot withdraw any part of the CD before maturity unless you die (or a judge deems you incompetent). The minimum is $1,500 and you need to fund it by June 24th to meet the July 1st deadline. There are no account maintenance fees.

Whether or not this is a good investment is left to you to decide but it’s an option available until June 24th when the CD is closed.