"We've been sitting in Vanguard's Short-Term Bond Index, reinvesting dividends. With the idea of keeping 5 years of future income in cash, I've been planning to build a 5-year CD ladder at Vanguard, starting with 2 and 3 year CDs, and rolling into longer term CDs each year. I've been reluctant to tie money up in 4 and 5 year CDs in the current low interest rate environment, and that's the same reason I've avoided the Total Bond Market Fund. I thought to keep a year of cash at ING Direct, whose rate seems to be the same as a 1-year CD. Advise sought."db,Thanks. No good advice available. All of us who refuse to plunge more money into the stock market or market time have been stuck between a rock and a hard place. It swallowed hard when 5-year CDs hit 5% but continued to ladder with spare change down to 4% (I let new money sit in the money market when rates were below 4% for about 6 months). I think this strategy will work better than having let it all sit waiting for rates to go up, because they didn't and would still have to go up pretty quickly to make up for lost interest while waiting.If you've got a big sum, I'd get 1,2,3, 4, 5 year CDs and start a ladder. With new money, I'd just keep buying 5-year CDs and roll over into Total Bond Fund or something when they come due, if rates look less risky.
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