written by reader Everbank promoted by Agora Financial

By barbarag, November 1, 2017

Text:
Unlike a lot of CDs, the MarketSafe® Emerging Currencies CD doesn’t pay periodic interest or even an annual percentage yield. Instead, it’s an indexed, U.S. dollar-denominated CD, and its performance is tied to the gains and losses of five currencies over the course of the CD’s 3-year term.

The five currencies are the Brazilian real, the Chinese renminbi, the Indian rupee, the Indonesian rupiah and the Turkish lira. At the CD’s maturity, its performance will be multiplied by a factor of seven.

Let me say that again: if the average performance of the CD’s components shows a gain at maturity, that figure will be multiplied by seven. So an average index gain of 6% when the CD matures in three years means you’ll receive a market upside payment of 42% of your principal!

More importantly, since your gains depend on the average performance of all five currencies, you just need a few of them to rise higher than the others fall. Even if the average gain is 1%, you’ll still receive seven times that number.

And if all of the components fall or remain flat, you’re still covered. That’s because all of EverBank’s MarketSafe® CDs guarantee at least the 100% return of your initial principal. So the only leverage you’ll see is on the upside.

This is a discussion topic or guest posting submitted by a Stock Gumshoe reader. The content has not been edited or reviewed by Stock Gumshoe, and any opinions expressed are those of the author alone.

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catherine
catherine
2 years ago

Are you asking a question? Working for Agora? For Everbank? Please clarify why you posted, and maybe someone can help you.

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Travis Johnson, Stock Gumshoe

Agora promotes those MarketSafe CD’s every now and then — they’ve offered some based on indices, some based on commodities. This one is more or less as described — if the average of those five currencies is more valuable on the end date in three years than it is on the start date, you get a 7X levered return on the difference as well as the return of your principal. If the average is lower, you get no return but do get your principal back. No early withdrawal allowed. Details here: https://www.everbank.com/investing/marketsafe/emerging-currencies

I’ve found Everbank to be reputable and have used them in the past for interest-earning foreign currency accounts, though I haven’t used their more complex MarketSafe CDs.

Do note that the likelihood of the average value of those five currencies going up versus the US$ is probably quite low, at least going by recent history (they’re all down versus the dollar over the past three and five years), though it’s certainly possible.

And, of course, there’s the opportunity cost of tying up your money — which is low right now, to be fair, but still real… you can get about 2% annual returns from a “regular” CD right now. That “opportunity cost” provides Everbank with enough money to go out and use futures to cover their risk if things all line up and all of those currencies rise in value in unison over the net three years.

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