The latest MarketSafe CD offer from EverBank is the MarketSafe Diversified Commodities 5-Year CD. It’s a risk-free investment opportunity that may interest investors who seek higher returns than those offered by traditional CDs. But, is it right for you?

MarketSafe Diversified Commodities CD Details

The Diversified Commodities CD allows customers to invest equally in 10 popular commodities: WTI Crude Oil, Gold, Silver, Silver, Platinum, Soybeans, Corn, Sugar, Copper, Nickel and Lean Hogs.

  • Term of 5 years
  • Minimum deposit of $1,500
  • No maximum deposit (according to an EverBank representative)
  • No monthly account fees
  • No market risk
  • FDIC-insured
  • Deposit principal guaranteed
  • Accounts: Personal, Business, and IRA

In the worst case scenario, you are guaranteed to get back at least your initial account deposit after 5 years (not accounting for inflation). That is enough of a convincing reason for many investors to take advantage of this opportunity.

The standout rule of this CD is that you cannot withdraw any part of the CD prior to maturity, except in the event of legally announced incapacitation or death (deposit principal protection is forfeited and possible suffer a loss due to market performance).

Accounts can be opened online, through the phone, or by mail. The deadline to fund this CD is March 17, 2011. The CD term begins March 24, 2011 and it matures on March 29, 2016. The commodity indices are tracked on March 24, 2011 (Initial Value Date) through March 24, 2015 (Final Value Date). There will be five annual Pricing Dates for the CD.

Before you open an account, you should consider the strict rules and profit potential of the CD.

CD Returns Calculation

From the MarketSafe Diversified Commodities CD term sheet:

“For each year, calculate an Interim Return for each of the 10 commodities, by detemining the difference between the Initial Value and the Interim Value as of the applicable Pricing Date to get the Interim Return for that Commodity. The Interim Return for any commodity is capped at 10% and cannot be less than -20%. Add those Interim Returns and divide by 10 to get the Average Interim Return for each year. The Average Interim Return for any year is subject to a floor of 0%. At the end of five years, add the Average Interim Return for each of the 5 years to get your Cumulative Return.”

In short, the maximum potential return on investment on the CD is 50%. The most you can get back after 5 years on a $10,000 deposit is $5,000.

Comparing Returns

In exchange for low risk, the returns on the MarketSafe Diversified Commodities CD will reflect the performance of the actual commodity indices tracked. For example, the price of crude oil increased 77.9% from 1/1/09 to 1/1/10. Investors with greater risk tolerance may have invested directly in these commodities and netted a much larger profit. But, there is also the chance to lose money.

Investment product5-Year Annualized ReturnOverall percentage return after 5 yearsNet profit after 5 years
3.00% APY 5-Year CD3.00%15.9%$1,593
Broad market portfolio8.00% (assumed)46.9%$4,693
MarketSafe Diversifed Commodities CD8.45% (max possible)50%$5,000

Because interest rates are currently offering such abysmal returns, the MarketSafe Diversified Commodities CD is a great way to step into investing in the more profitable commodities markets. It certainly is not for anyone who isn’t comfortable leaving a large amount of money in this tightly locked CD.

How do you feel about the EverBank’s Diversified Commodities CD? Are you or would you consider investing in this CD?

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