FDIC Market-linked CD's
Potential high return.
Unlike traditional fixed-rate CDs, this type of certificate of deposit earns an interest rate that is tied to a fluctuating market index.
Therefore, when the market does well, so does your investment.
One of the most important rules of investing is to diversify your assets.
The "eggs in one basket" approach not only increases your risk of losing money, but prevents you from participating in several different opportunities to obtain potentislly favorable returns at the same time. You can easily diversify your portfolio among several asset classes with one index CD account.
Market participation combined with risk aversion.
If you invest in an array of stocks, bonds and mutual funds, there is nothing preventing you from losing every penny should markets plummet. However, most issuers of market-linked CDs offer principle protection.
This means that your initial investment is protected from downturns in the market, but only when you hold the CD until maturity. Early withdrawal typically eliminates any possible earnings, as discussed below.
There are a few exceptions, but almost all market-linked CDs are protected by the FDIC, up to the maximum of $250,000 until 2014.
However, do note that only the principle amount is insured, not the interest you earn.