Certificates of Deposit (CDs) have been a conservative investment strategy for decades. As interest rates rise, they gain renewed appeal for investors seeking secure, fixed-income assets. In 2024, the single best strategy for making money with CDs could be a laddering approach combined with a keen eye on the yield curve and changes to Federal Reserve policies.

A CD ladder involves purchasing several CDs at once, each with different maturity dates. This strategy allows you to benefit from higher interest rates on longer-term CDs while maintaining liquidity by having regularly maturing CDs. Here’s how you can effectively use a CD ladder in 2024:

1.Assess Current and Projected Interest Rates:Before building your CD ladder, look at current interest rates and try to gauge where they might head based on economic indicators and Federal Reserve announcements.

2.Choose the Right Ladder Length:Decide the length of your CD ladder depending on your financial goals and liquidity needs. In 2024, a five-year ladder could ideally balance return and access to funds.

3.Diversify Maturity Periods:Purchase multiple CDs with staggered maturity dates (e.g., six months, one year, two years, etc.). This way, as each CD matures, you have the opportunity to reinvest at potentially higher rates if interest rates continue to rise.

4.Shop Around for Rates:Don’t settle for the first rate you see. Research online banks and credit unions which often offer higher rates than traditional bricks-and-mortar banks.

5.Keep an Eye on Early Withdrawal Penalties:Should you need to access your money sooner than expected, be aware of any penalties that could eat into your earnings.

6.Consider Special Features: Some institutions offer ‘bump-up’ or ‘step-up’ CDs that allow you to increase your rate if prevailing interest rates rise during the term of your CD. This feature can be particularly beneficial in a rising rate environment like that which we’re experiencing in 2024.

7.Monitor Inflation:Even the best CD rates can be outpaced by inflation, eroding real returns. Ensure that your CD’s rate will at least keep up with inflation expectations so your purchasing power isn’t diminished over time.

By following this strategy in 2024, investors can optimize their earnings from CDs while maintaining flexibility in their investment portfolio. However, it is essential always to be aware of economic trends and adjust your approach as necessary because the efficacy of any investment strategy is never guaranteed and is often subject to change due to external factors impacting the economy.