It’s
a question we hear from customers all the time. “Should I get a shorter-term
Certificate so I have my money to re-invest in case rates go up? Or would it
be better to lock in today’s rate for 3-5 years in case rates go down?”
I wish there was a single, simple answer but – as is so often the case with
shrewd investing – there are a couple of issues it pays to think about.
First of all, rates seem to be going up in the very short-term. By “very
short-term,” I mean the next several months. But beyond that, not even the
best economists can predict for sure. Will rates be up 15 months from now? Will
they be down? It’s a coin toss. Certainly, people taking today’s 6-9
Month Certificates are betting rates will go up. If rates go down, it’s
an opportunity lost.
Here’s
the key fact to bear in mind: Short-term is good sometimes. Long-term is
good other times. Diversification is always good! Here at the Bank, we
advise customers to consider taking the amount they plan to invest and hedging
their bets by what we call “laddering.” For example, if you have $20,000,
spread it out, putting equal amounts each in 1-Year, 2-Year, 3-Year, 4-Year and
5-Year Certificates. This approach delivers maximum flexibility & decreased
interest rate risk with the powerful 100% guarantee only FDIC & SIF coverage
can provide. It’s simple … and it works. Does “laddering”
sound like something you’d like to try – maybe for your Individual Retirement
Accounts? Come see us!
