f you've decided to stock your CD matures and earns you
some money away in a interest on your $2000 principal.
certificate of deposit, why
not reap the highest benefit over
time by laddering your CD When your certificate of deposit
investments? What's a CD latter? matures, you roll it over into
I'm glad you asked. another CD. The best strategy is
to purchase a new CD at the
A CD ladder is made up by longest term, which in our
purchasing several CD's at one example above would be five
time with different maturity years. This strategy allows you
dates. One example of a CD ladder to take advantage of the higher
is to have maturity dates of one rates normally associated with
year, two year, three year, four longer-term CDs while maintaining
year, and a five year CD. These more frequent access to part of
five investments make up the your funds.
rungs of your CD ladder with one
certificate maturing every year Another advantage to laddering
for the next five years. your CD's is that over time it
evens out the high and low
For example, let's say you had interest rate cycles. Some years
$10,000.00 to invest. You would interest rates will be high,
buy 5 CD's for $2,000 each with other years the rates will be
each one invested for one year lower. Currently banks are paying
more than the first. So you'd some of the highest CD rates
have a $2,000 CD maturing in one we've seen in the last decade.
year, another in two years, and
so on up to the last one which Before deciding on laddering your
matures in five years. Every year CD's, make sure you can afford to
for the next five years one of do without that money for a
period of time. You'll pay a
penalty for withdrawing your The benefits of laddering your CD
funds before your CD reaches investment is that you lower your
maturity. risk of losing money when rates
are low, increase your returns
Also, don't get stuck on the idea when rates are high, and still
that you have to invest in a have access to a portion of your
5-year ladder. You may be more money should you need it for an
comfortable with a three year emergency.
ladder based on your financial
needs. Or you may want to try a "© 2005,
ladder with a 3 month, a 6 month, http://www.yourfreecreditreportno
a 12 month, and a 24 month w.com
maturity.
About the Author:
James is editor of "TO YOUR CREDIT", a free weekly newsletter with tips to help you manage your personal finances. Subscribe today and receive his e-book "IDENTITY THEFT- How To Avoid Becoming the Next Victim!" and other money-saving bonuses by visiting http://www.yourfreecreditreportnow.com
Source: www.isnare.com
