Smart people here often recommend a 5-year laddering of CD's for many reasons. I haven't seen any discussions against using ladders though they may have occurred. Though I'm sure a CD ladder may be best for some investors I do not think it will maximizes returns over the next 5 years. Is this guy nut?…. wait let me explain.

CD rates start at about 3% (1yr) and go up to 5.25% (5 yr at Pentagon Federal CU). If we knew rates would stay the same or go down over the next five years… would anyone improve their return by setting up a ladder instead of putting everything into the 5 yr CD? I'm not raising my hand.

Two out of three is not bad…but everyone knows rates are going up so isn't it best to setup a ladder? No… I choose load up on the 5.25% and if rates go up more then roughly ½ % wonderful, sell them (pay the six month penalty) and buy the new higher yielding 5 year CD's. You will still stay ahead of the ladder, because only 1/5 of the laddered funds will get the new 5 year rate. It's works even when rates start falling, you just hang on to what you have, while the ladders return fade away. As you can tell I don't have a clue why anyone would set up a ladder. Please tell me, thank you.

mjcalb