Maximize Your CD Earnings by Laddering

Even the best economists can't predict the financial future with absolute certainty. So how is a typical investor supposed to choose between short-term certificates of deposit (CDs), which offer liquidity in case rates go up, and long-term CDs, which lock in higher rates in case they drop?

Actually, there is a way to maximize your return while preserving liquidity with CDs-no matter which direction interest rates head. Just use a proven investment strategy known as laddering.

CD laddering involves staggering your CD maturity dates to make the most of short-term liquidity and long-term yields. This technique lets you reap higher returns than you might have earned if you invested all of your funds in one short-term CD.

For example, assume you have $6,000 to invest. Rather than tying up the entire amount in one CD, place $2,000 in each of three separate CDs with different maturities-6, 12 and 18 months, for example. Then, as they mature, roll them all into 18-month CDs.

Consider the benefits

• Staggering your CDs with those maturity dates ensures that you'll always have access to part of your funds within six months.
• The bi-annual maturity dates give you the opportunity to reinvest at least some of your savings in higher-yielding CDs should rates increase.
• You can ultimately enjoy the higher yields that come with longer maturities, while having the convenience of liquidity every few months.
• If you need to withdraw a portion of your cash before maturity because of an emergency, you'll face a lower early withdrawal penalty than if you had invested all your money in one CD.
• You can ladder your CD maturity dates strategically to match the timing of your financial goals-from college tuition to vacation plans to home improvements.

CDs offer the benefits of guaranteed, fixed income with no risk to your principal and Woodsville Guaranty can help you choose from a wide range of maturities, from 6 months to 5 years.

For more information about how to use CD laddering to meet your specific objectives, call or visit any one of our offices and speak with a Customer Service Representative.