Climing the CD Ladder
Each time you purchase or renew a
certificate, you're faced with the task of deciding how long you should
tie up your money.
There is a solution. It's called
"laddering," and it's a time-tested way to help improve your
certificate returns without sacrificing safety and while keeping part of
your reserves liquid.
To build a ladder, purchase several
certificates at the same time with different terms-- in six-month
intervals. At the end of each term, renew the certificates with the
longest term used in the initial purchase. This strategy provides you with
the liquidity, since you will have access to part of the investment
every six months without penalty.
Laddering can increase your rate of return
because most of your money is invested in longer-term certificates, which
generally pay higher rates. This strategy also gives you the opportunity
to purchase your certificates at different times, providing protection if
rates go up or down. If you want to get out of the interest-rate guessing
game and make your cash reserves and fixed assets work as hard as you do,
consider a certificate laddering strategy.
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