Today’s best CD interest rates are pretty poor compared to where they were a couple years ago. Bonds are usually a good place to put money but in today’s market they can be risky. Something that is FDIC or NCUA insured is the route you should go, like a certificate of deposit.
A CD ladder is a popular strategy and helps avoid risking getting a lot of money caught in a bad interest rate. The idea is to take out several CD rates with varying terms, say 1 year intervals from 1-5 years. Then when each CD matures you can renew the term for 5 years. This way you’re getting a 5 year CD term and each year you have a CD that is maturing. This way you’re getting new interest rates every year so you’re never investing all your money into one year’s interest rate. This limits your risk to getting a bad interest rate. Many professional investors use this investment method but anyone can carry it out on their own.
If you have enough money you should look into jumbo CD rates. They offer higher yields than normal CDs because the minimum deposit on these accounts is $100,000.
You can use a CD ladder for your retirement savings as well. IRA CDs can be setup in the exact same way that normal CDs are setup. Just make sure that the bank you want to invest in offers IRA CDs.
CDs are a great part of anybody’s investment strategy. You need a good diversity of stocks, bonds, CDs, and other investments. CDs represent the less aggressive portion of your investments because they’re federally insured by the US government. They’re as close to zero risk as you can get with your money. Additionally, if you use CD laddering you’re also reducing your risk of being exposed to low CD rates. For example if your CD matured this year you’d be forced to lock into low interest rates. With CD laddering only a portion of your money would get locked into this year’s low interest rates.