Laddering
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A proven way to boost your fixed income returns.
Laddering is a diversification technique used for bonds and Certificates of Deposit (CDs). It’s a proven
way to lower the risk of your overall fixed income portfolio while helping to increase the return. Laddering
helps to protect you from interest rate fluctuations, while giving you access to at least some of your money
at regular intervals.
How laddering works.
Laddering involves buying a series of bonds or CDs that have different maturities.
Say, for example, you have $25,000 to invest. Instead of buying a single $25,000 bond or CD, you would buy
five $5,000 securities — each with a different maturity. The maturity dates would be “laddered,” ranging,
say, from one year to five years. With these five different “rungs” on the ladder, you avoid committing all
of your money to one rate of return. Because you have staggered maturity dates, access to a portion of your
money is never too far away … and you have the opportunity to reinvest at prevailing rates. Plus, with
multiple rungs, you can reinvest at longer terms and most often increase your overall return.
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Let experts do your laddering.
Building a laddered fixed income investment portfolio can be fairly complex and time consuming. That’s why,
for bond investing many people choose to invest in mutual funds and leave the laddering to the experts.
At Dollar Bank, you can leave CD laddering to the experts as well.
Dollar Bank has a patent-pending process that makes buying and owning a laddered CD investment as easy as
buying a single CD. Dollar Bank will customize a CD Ladder to your time frame and needs, and the bank will do
all the work of maintaining and updating the ladder for you. Of course, Dollar Bank CD Ladders are protected
by the Federal Deposit Insurance Corporation (FDIC), the rates you earn are guaranteed and there are no
management fees.
Also see Dollar Cost Averaging or click here to learn more about the
Dollar Bank CD Ladder
CD Ladder Takes Fixed Income Returns Higher
Two investors, each with $25,000 to invest
Kristen put her $25,000 into a single one-year CD, and renewed every year for 5 years.
Pete bought five CDs, placing $5,000 in each of a one-year, two-year, three-year, four-year and five-year CD.
As each CD matured, he reinvested into a five-year CD.
Look at the income each investor earned:
