|
|
|
Laddering is an investment technique which increases the liquidity of a large investment by breaking the total investment into smaller portions and investing each portion for progressively longer terms, such that a portion of the investment becomes available periodically.
For example, a $40,000 investment may be broken up into four equal portions of $10,000, invested for 12 months, 24 months, 36 months, and 48 months. The liquidity period in this example is 1 year; as long as the ladder is maintained, a portion of funds will become available every 12 months. To continue the ladder, the investor simply reinvests the available portion for the longest term of the ladder (48 months in our example). If the ladder is maintained, the entire investment will earn dividends at the rate of the longest term upon the completion of one cycle. Because a ladder scheme is more liquid than a rollover investment, the investor can take advantage of rising rates in a favorable investment environment to improve earnings. In a less favorable investment environment, the investor can more quickly seek out alternative investment vehicles.
Explore laddering options with our convenient Share Certificate Laddering Calculator
This calculator is provided for informational purposes only. Share Certificate rates are subject to change at any time, and additional terms and conditions may apply. Use of this calculator is not a guarantee of a particular return on investment. Like other investment techniques, laddering may not produce the highest returns possible in all investment environments.
|
|
