The Basics of CD Laddering CD Laddering 101

Investing to make your money grow is a smart move and financial institutions have plenty of investment tools for you to diversify your portfolio. Certificates of deposits are just one great financial product that can help you meet your long-term savings goals. CDs are a timed financial product. Simply put, a customer can invest a certain amount of money for a fixed period of time (commonly from three months to five years) and in return they will receive a fixed rate of return until maturity. CD laddering is a clever investment strategy that allows investors to diversify their holdings into shorter-term investments so that higher interest rates can be taken advantage of in the future. Anyone with decent organizational skills are a functioning PDA can build their own CD ladders. Some basic tips for the strategy include:

• Count your Ps & Qs: Before you even start searching for competitive CD bank rates, you need to know the total amount of money you can comfortably invest.
• Time Line: At this stage of the game you should know how long you have to invest. If you plan on using CD ladders to save for a home purchase in 3 years, then five year CDs should be avoided.
• Rate Research: CD interest rates can fluctuate daily and vary based on the investment size and time. Based on your personal financial resources and your schedule, you can find plenty of top rates to fit into your ladder.
• Organize: A big calendar featuring the start and maturity dates of your investment and the CD amount is a must. Make sure to set a reminder for to conduct a search for new rate information two weeks prior to the maturity date.
• Read the Fine Print: Before investing a dime, make sure to familiarize yourself with every nuance of the CD in question.
• Invest: Once you are comfortable with your plan, feel free to invest.
• Rinse and Repeat: With a CD ladder, throughout the year you will have the opportunity to find higher interest rates. When your reminder comes due, start all over and find your next investment opportunity.

Currently bank rates are at historic lows as the Feds are still suppressing interest rates as a way to stimulate the economy. While the low interest rates are great for those looking for cheap money to borrow, low rates are negatively impacting investors looking for high rates of return. CD laddering is a simple strategy you can do to ensure that you can make as much money as possible both now and in the future.