How to Create a Certificate of Deposit Ladder

Video Transcript

"This is financial advisor Patrick Munro, talking about how to create a certificate of deposit ladder. What we mean by that is when you start with one certificate of deposit with say a six month term you can go three to four to five months along the track, and when you have more dollars to invest you, in fact, can go to the bank and take out another certificate of deposit which continues to earn interest while you redeem your other CD over a period of time. If you do this over a long period of time, and the interest rates are sufficient you can enjoy interest income in a fully secured environment. Unlike stocks or mutual funds certificates of deposit are instruments that are insured by the FDIC, Federal Deposit Insurance Corporation, and currently though in these recessionary times interest rates are sub three and a half percent and inflation is running close to five and a half percent, so CD's are called certificates of disappointment these days. Laddering is very rare. This is Patrick Munro, talking about how to ladder CD's."