A CD ladder for continuous flow of money

We all know that CDs (Certificate of Deposits) are more attractive than traditional savings accounts owing to higher rates. The best part about CDs is that there are different plans for investments catering to different requirements. While you think of investing, you have to know the duration for which you can invest and the kind of growth you want and it is easy to find the CD which can do it for you.

The advantage on CD is that they do not subject your money to risk like the stock markets do. They claim to give you certain returns and you know that you will get it at the assured period. The locking period poses a problem to many since there is a penalty levied on you if you withdraw within that period. How can you work your way out of it? The solution lies in using CD ladder.

As the name goes, when you talk of CD ladder you are talking of a mechanism wherein you have a step-by-step availability of money. The trick here lies in timing your investment and selecting the right CD duration. CD is available from as short as 6 months to as long as 60 months. You can exploit this to your benefit by purchasing the CDs appropriately.

To create a CD ladder, you purchase CDs for varying periods. You plan it such that they do not come for renewal at the same time. Each time you renew the CD, you do so at the rates assured by the financial institutions at that point of time governed by the markets so you can benefit from the fluctuations.

One main advantage of CD ladder is that you will not let all your money be subject to lower interest rates. You have no control over the market which manipulates the rates regularly. You may have purchased your CD at a much lower rate than what is being offered today and may not have an option because withdrawing it may attract penalty. By making a CD ladder, you can nullify the losses due to fluctuation with the profits.

Since you would have made your investments such that they come for renewal at different points of time, there is very less chance that all of them will earn a lower rate. While the rate may be low for one of your renewals, it may be much higher on yet another renewal, hence minimizing your losses.

CD ladder is a healthy way to see your money grow. You have to get a grip of the trick which can be a little challenging, but once done, it can assure your good returns along with security for your money. Just look up a website or manual that can help you with the planning if you are facing too many hassles. When you opt for the ladder, you will have the assurance that you will be getting money at regular intervals since you can make a withdrawal when you renew the CD. The secret lies in juggling your finances and making the best of it.