Things to consider
Buy & hold
CD ladders employ a "buy & hold" strategy. Selling your CDs before maturity will incur a charge, and you might risk selling them at a price below your initial investment amount. A CD ladder can be purchased in multiples of $4,000 (for 4-rung ladders) or $5,000 (for 5-rung ladders), so think about how much you want to invest in this less liquid strategy while maintaining a certain amount of liquidity for planned or emergency spending needs.
Yield vs. liquidity
Typically, the longer-dated CD ladders pay higher yields than the shorter-dated ladders because CD rates generally follow the upward sloping rate structure of the yield curve. On the other hand, the 1-year CD ladder has maturities every 3 months. So consider when you will need access to the principal as a result of the CDs’ maturity intervals, and choose the right ladder for your situation.
As you construct your CD ladder, you’ll be prompted to choose how you’d like to handle the principal generated as your CDs mature:
- Allow the maturing principal to be returned as cash into your Fidelity account
- Elect to have the principal from maturing CDs automatically reinvested using Fidelity's Auto Roll service. The reinvestment will be in another new issue CD whose term to maturity equals the length of the Model CD ladder strategy (i.e., 1, 2, or 5 years)
Maintaining your CD ladder
Once you have purchased your CD ladder, the CDs will be viewable in your Positions listings for the specific account. Your CD ladders may also be viewable in the summary listings page dedicated to all bond and CD ladders held. From the ladder page, you will be able to review which of your CD ladders have the Auto Roll functionality enabled and turn it off at any time. Read Understanding Model CD Ladders (PDF) for more information.