CD Laddering

In difficult economic times, people are naturally reevaluating their investment strategies. Open any of the dailies and columnists are doling out advice on ways to minimize risk. Fixed-income investments are especially important as we look to realize a predictable cash flow.

A common fixed-income investment strategy is Certificate of Deposit (CD) laddering. A CD ladder involves taking a sum of money and investing it in various CDs with different maturity dates to produce a predictable cash flow. Once one CD matures the principal is reinvested and the ladder continues. The ladder typically works like this:

• Take 10k and invest it in 10 CDs with different maturity dates.
• Receive quarterly cash flows over the next 2 ½ years.
• Reinvest the principal, continue the ladder.
  

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Do you engage in CD laddering? Have you considered it? I would love to hear any tips you have regarding getting the most out of your CDs.