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-six, 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 we 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 office of Woodsville Guaranty Savings Bank and speak with a Customer Service Representative.