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The Bottom Line. A brokered CD is similar to a traditional one but may provide you with a higher yield and more flexible loan term options. These CDs also offer more liquidity since you can resell them on the secondary market before their maturity date and avoid an early withdrawal penalty.

It is like a savings account. For example, Joe invested $5,000 in CD with a bank at a fixed interest rate of 5% with 5 years maturity. Upon maturity, Joe's initial investment of $5000 had reached $6,382. The return on CD for the period of 5 years was $1,382.

A certificate of deposit (CD) is a savings account that holds a fixed amount of money for a fixed period of time, such as six months, one year, or five years, and in exchange, the issuing bank pays interest. When you cash in or redeem your CD, you receive the money you originally invested plus any interest.

Index-linked CDs are similar to traditional Certificate of Deposit, but they allow the investor to participate in the appreciation, if any, of a particular stock index (like S&P 500), during the term of the CD.

An index-linked term deposit is one where the rate of return is linked to the stock market and therefore offers potentially higher growth. Your principal is guaranteed, but the performance of the market determines how much money you'll make at the end of the term.

CDs are a safer and more conservative investment than stocks and bonds, offering lower opportunity for growth, but with a non-volatile, guaranteed rate of return. Virtually every bank, credit union, and brokerage firm offers a menu of CD options.

Certificates of deposit are issued by banks, credit unions, and other financial institutions. They provide a guaranteed interest rate and are often insured by the federal government. Mutual funds invest in a diversified portfolio of securities and their returns will fluctuate.