How to Implement a Laddering Investment Strategy

Brenda Switzer — CFP®, RIS, Wealth Specialist, Credential Asset Management Inc.
Brenda Switzer
Brenda Switzer

CFP®, RIS

Wealth Specialist

Credential Asset Management Inc.

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Are you looking to earn more interest on your investments but still require access to your funds?

A laddering investment strategy is an excellent solution. It’s also relatively easy to utilize.

Start with Five Years

Begin with a simple 5-year ladder.  Take your initial investment and divide it evenly across the five maturities:

  • 1/5th of your deposit is invested for 12 months
  • 1/5th of your deposit is invested for 24 months
  • 1/5th of your deposit is invested for 36 months
  • 1/5th of your deposit is invested for 48 months
  • 1/5th of your deposit is invested for 60 months

As each deposit comes due it is re-invested for 60 months continuing the ladder, until all deposits are at the 60-month rate.  Each year, you will see the average interest rate of the ladder increase.  

A fifth of your investment is still available every year to redeem so a laddering strategy maximizes your growth and gives you access to your investment when you need it. 

Take Advantage of Longer Terms

The theory behind the strategy is that the best rate available has historically been the 60-month rate.  Laddering lets you capture the higher rates available for longer terms.

Laddering is also ideal in an any-rate environment.  It provides lower volatility and predictable returns when the markets are low or uncertain.  And when markets are expected to rise, you can re-invest 1/5th of your investment at a new higher 5-year rate.  Your entire investment isn’t locked in so you can take advantage of rate increases.

Innovation Wealth Can Help

Ask an investment specialist to help you implement a laddering strategy today.  You’ll earn interest on your interest, have access to your funds when you need them, and maximize your growth no matter what is going on in the marketplace.

Mutual funds and related financial planning services are offered through Credential Asset Management Inc.

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