CD Laddering

August 12, 2008
By Mukesh Chatter

In difficult economic times, people are naturally reevaluating their investment strategies. Open any of the dailies and columnists are doling out advice on ways to minimize risk. Fixed-income investments are especially important as we look to realize a predictable cash flow.

A common fixed-income investment strategy is Certificate of Deposit (CD) laddering. A CD ladder involves taking a sum of money and investing it in various CDs with different maturity dates to produce a predictable cash flow. Once one CD matures the principal is reinvested and the ladder continues. The ladder typically works like this:
  • Take 10k and invest it in 10 CDs with different maturity dates.
  • Receive quarterly cash flows over the next 2 ½ years.
  • Reinvest the principal, continue the ladder.
I'm sure I don't need to remind you that MoneyAisle has amazing CD rates, which you have access to 24/7 - run a live auction and see for yourself. It's absolutely free.

Do you engage in CD laddering? Have you considered it? I would love to hear any tips you have regarding getting the most out of your CDs.

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