the_paulr (the_paulr) wrote in personal_roi,

  • Mood:

A question about CD ladders

A classic CD ladder (according to involves opening five CD's at once with each one maturing a year apart. By rolling them over into five year CD's when they come due you end up with five five year CD's with one maturing every year.

That makes sense, I guess, but I started wondering - why not just put all the money in a one year CD and keep rolling it over every year? From what I could see interest rates are, on average, a little bit higher on a one year CD than on a five year.

So my question is, does the extra four years make that much of a difference? (Assuming, of course, that the one year CD is rolled over with all the interest earned.)
  • Post a new comment


    default userpic