In the investing world, the market-linked CD is a way to have your cake and eat it too – a product that offers stock market gains with protections against loss.

At least, that's what the ads tell us, and stock market upside coupled with loss protection seems especially attractive these days, as investors hope the Trump rally will keep going but recognize a pullback can come anytime this late in a bull market .

But these certificates of deposit , also called equity-linked CDs, structured CDs and index CDs, have long been controversial, with critics saying they offer the worst of both worlds, not the best.

So are they appealing today, or not?

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"We've found that consumers, discouraged by the low-interest rates found among today's savings accounts and standard CDs, are showing renewed interest in market-linked CDs," says Madison Reed of ValuePenguin, a market research firm that has surveyed consumer attitudes on the subject.

She says consumers are attracted by prospects of high yields, though banks tend to emphasize the products' safety.

"I see absolutely nothing wrong with a consumer purchasing something like this as long as there is full disclosure and they understand the product," says Bill Reese, finance professor at Tulane University's A.B. Freeman School of Business.

Heavily criticized over the years, market-linked CDs are kind of hard to find today, though they still exist. You'd probably have to phone a few banks, brokerages or fund companies to track one down.

What You Need to Know About Buying CDs

Market-linked CDs typically track a broad index – the "reference asset" – like the Standard & Poor's 500 stock index, or a bond or currency index, and often promise the investor a minimum yield, FDIC protection on the original principal, plus gains if the reference asset goes up. The guaranteed yield is typically less than on an ordinary CD of the same maturity.

Reese says the investor should think of the product as having two parts: an ordinary CD paying less than a similar CD of the standard type, plus a "call" option linked to the reference asset. A call gives its owner the right to buy shares of stock or an index at a set price for a given period, and is profitable if the stock or index goes higher, but expires worthless if it does not.

In Reese's example, an investor might put $10,000 into a market-linked CD guaranteeing 1.5 percent, or $150 a year, while an ordinary CD would pay 2 percent, or $200 a year. In effect, the $50 difference is spent on a call option that will be profitable if the S&P 500 rises higher than when the CD was purchased. If that happens, the investor gets the option profit that exceeds the guaranteed 1.5 percent.

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But that's not always the case. Many of these products have a "participation rate" that limits the payout to a portion of the index gain – say, 75 percent. The payout may also have a cap. And the CD issuer may calculate the reference asset gain as an average over time rather than using the level at the CD's maturity.

As with most CDs, these are designed to tie your money up until the CD matures, so they are not good if you'll need your money unexpectedly, or if you need steady income, as the payoff comes at the end.

"Sales commissions or deposit broker fees may come out of your initial CD deposit, diminishing your returns even before the behavior of the linked securities comes into play," Reed says. "Another fee to watch out for in the account disclosures is any type of annual fee, which is sometimes included to account for the ostensibly more complicated nature of market-linked CDs."

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Some of these products also have a call feature that allows the issuer to return the investor's principal and earnings early, leaving the investor with less than if the CD had been kept until maturity. The issuer is likely to call the CD when it suits the issuer, not the investor. That could happen if interest rates fall and the issuer doesn't want to continue paying what it has promised. The investor would then have to reinvest at less favorable terms.

Sometimes the principal is guaranteed only if the CD is kept to maturity.

These cautions explain the worst-of-both-worlds criticism: the guaranteed income is less than you could make on an ordinary CD, while the potential gain falls short of what you could earn if the stock market does well.

"We don't recommend this for everyone," Reed says. "The complicated conditions and restrictions built into various parts of this CD type make it a risky proposition for all but the most dedicated and informed investors. For the most part, consumers will not lose out by selecting a straightforward fixed-rate CD of similar length."

Obviously, it's important to read all the offering materials very carefully, as features can vary considerably among different issuers.

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Market-linked CDs can have very long maturities – as long as 20 years. That's a long time to tie up your money, especially for the typical fixed-income investor, a retiree who may have unexpected needs or would want heirs to have quick access to assets after the investor's death.

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Raymond Mitchell, Author

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