“CD Laddering: How to Build and Benefit from Multiple CDs”

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Is It Better to Have Multiple CDs or One Large CD?

When deciding between multiple CDs or one large CD, consider the annual percentage yield (APY) and the amount you plan to invest. APYs and minimum deposits can vary significantly. Some CDs offer higher rates for larger balances, while others provide competitive rates with lower minimums. It’s essential to compare options to find the best fit for your financial goals. For instance, shorter terms might be preferable if liquidity is a concern. Utilizing a strategy known as CD laddering can also be beneficial.

How to Maximize FDIC Insurance With Multiple CDs

CDs are insured by the Federal Deposit Insurance Corp. (FDIC) for up to $250,000 per depositor, per insured bank, per category. To extend your coverage, consider having a joint owner on your account, spreading your savings across multiple financial institutions, or opening new accounts within different ownership categories at your current bank. This can include retirement accounts, trusts, and employee benefit plan accounts.

How to Build a CD Ladder

Building a CD ladder involves investing in multiple CDs with varying terms, allowing them to mature at different times. This strategy provides a steady stream of returns and liquidity. Here’s how to create a CD ladder:

• Research CD rates and terms from various financial institutions, including online banks and credit unions.
• Decide on maturity intervals that align with your financial goals.
• Open and fund your CDs, keeping track of their expiration dates to plan your next steps, whether renewing, reinvesting, or using the funds as needed.

How Many CDs Is Too Many?

While there is no limit to the number of CDs you can hold, it’s crucial to maintain a diversified investment portfolio. Diversification helps balance low- and high-risk investments, ensuring stability and potential for higher returns. CDs offer low risk and steady returns, but relying solely on them might limit your exposure to higher-return investments.

The Bottom Line

Owning multiple CDs can diversify your portfolio and provide steady returns with low risk. However, it’s essential to balance your investments to include both low- and high-risk assets. This approach helps offset potential losses and keeps your portfolio healthy.

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