Laddering Strategy

Back in the days when interest rates at traditional banks were still good, you could lock up your funds in “CD’s” or certificate of deposit which you could use to increase your yields above what a savings account would offer. These could be up to a year long. In order to combat this issue a laddering strategy was utilized that involved locking up money in a variety of durations that way you always had some money that would be expiring from whatever term it was in. This ensured you could get the most yield while still having access to a portion of your funds. This article at investopedia goes into more depth.

Some of the platforms will give you better rates for a lockup or require it to access their best rates. Crypto.com is one of the platforms we use quite a bit due to its safety and good rates which offers a one month and 3 month terms on the deposits. A laddering strategy would look something like this if you wanted to have funds coming due each month and had a total investible amount of $12,000.

Month 1 – $4,000 3 month term, $8,000 1 month term

Month 2 – $8,000 matures from the 1 month term and you then take $4,000 into 3 month term and $4,000 into a 1 month term.

Month 3+ – $4,000 matures from the 1 month term and you then take $4,000 into a 3 month term.

This functionally gives you $4,000 you can access every month.

If you wanted to have funds maturing weekly, you could do the same thing, but using 1/12th of your capital every week into the 3 month term and putting 3/12th into the variable product and 8/12th into the one month term. Every week you would take 1/12 out of the variable allocation and put it into the 3 month term. Each month as your one month term expires you would put 3/12 into the variable term and 1/12 into the 3 month term.