CD Laddering Can Spice Up Your Investing Life
October 27, 2009
According to Money-Rates' list of the best CD rates available today, a 6 month CD at 1.5 percent interest is a good deal. At the one year mark, anything near 2 percent is a good deal. Conservative investors who vividly remember CD returns of 3-5 percent are understandably questioning how good of a deal today's best rates CDs really are.
Meanwhile, the stock market has been up approximately 50 percent since March.
Nevertheless, certificates of deposit offer one of the only government-guaranteed ways to earn money without risking the loss of any money. Therefore, when it comes right down to it, conservative investors are likely to continue buying CDs so long as they pay something more than zero percent.
Being able to sleep at night is a return on investment in its own right.
A CD Laddering Strategy Can Spice Up Your Investing Life
Few people believe that interest rates will remain this low forever. Eventually, CD rates will go up.
Problem is, many conservative investors are very, very bored in the meantime.
Laddering CDs can spice up your investing life. Laddering CDs, of course, entails buying CDs with staggered maturity dates. The mathematical benefits of laddering CDs are strong, but don't underestimate the psychological benefit.
When you have a CD coming due every other month, like clockwork, you have new money to invest every other month. Over time, even your "stock market guru" friends may become jealous of that fact.
