Background: For well over a decade, I have been a huge fan of CD ladders. Mind you, that decade was, for the most part, in a flat to falling-rate environment. Well, as we are now in a rising-rate environment, this old dog wonders if CD ladders are still optimal.
Analysis: A typical CD ladder has, as its anchor, the five-year CD. When one rung of the ladder matures, it is replaced with another 5-year CD, at the best possible rate.. Inasmuch as 5-year CDs offered the best "bang-for-the-buck", your rolling ladder would optimize yield with a minimum of hassle.
Conundrum: In this rising-rate environment, all the old "rules-of-thumb" are subject to review. For example, is a ladder of five-year CDs really optimal? As I've noted in other threads, this type of query gets little interest among PhD candidates. I've crunched some numbers, and have concluded that "optimal" these days might just be loading up on 12 - 18 month specials. Stated another way, when a rung matures, just plop it in the best 12 - 18 month deal out there.
Your thoughts?
