How to Maximize Your Returns with CDs

This article will show you how that $15,000 will become almost $19,000 just by sitting in the bank! Using a process called CD laddering, you can maximize your profit in five years.

Below, you will see an example of CD laddering that can help maximize the return on your $15,000. With this ladder, CDs will mature every 12 months. You will not have frequent access to the money, allowing the return to be higher. You can invest in shorter intervals if you would like, but the return will be lower. With CDs, if they are liquid (giving you access to the cash), the interest rates are typically lower. So if you don't need access to the cash, you should place in traditional or online CDs to get the maximum interest rates possible.

This is how you would allocate your money:

Invest $3000 in a 12 month CD at 3.91%

Invest $3000 in a 24 month CD at 4.15%

Invest $3000 in a 36 month CD at 4.35%

Invest $3000 in a 48 month CD at 4.6%

Invest $3000 in a 60 month CD at 4.85%

Now, what happens after your CDs mature? Well, with this particular scenario, your first CD will mature after 12 months. When that happens, you should place the money in a 60 month CD (since that is the longest term - we are working with 5 years). Make sure to check though what the current rates are at that time so that you can find the best place to put it. The same process should occur when your next CD matures.

After five years, your $15,000 will be $18,838. If you were to place that $15,000 in a traditional CD for five years at the current interest rate of 4.25%, that money would only be $18,551. This CD laddering technique will give you the maximum profit from investing in CDs.

If you do find that you will need to access your money, you should consider placing it in a liquid high-yield money market account. This way, you can still get to the money if you need to, and it will still be earning you interest.