When it comes to investing, people have developed all kinds of methods and strategies for maximizing their profits while at the same time trying protecting their investments. When it comes to certificates of deposit, more commonly referred to as CDs, many individual investors and financial advisors like to employ what's called the barbell strategy. The barbell strategy is essentially the creation of two kinds of CDs in your investment portfolio: CD's with long-term maturity dates and CDs with short-term maturity dates, without any CDs with medium-term maturity.
Many people like the barbell strategy for their CDs because it gives them a lot of flexibility in terms of managing their money and maximizing their profits. This is because withCDsat different maturity rates, they can take advantage of and react to changes in interest rates. Many financial institutions in the business of offeringCDswill offer the best interest rates on their longer-termCDs. So, if you have $25,000 to invest in a long-termCDof 5 years, you will get a better interest rate than you would with the same money put into aCDwith a maturity date of 6 months. So that long-term strategy is one side of your barbell investment strategy. On the other end, you keep your money in short-termCDsbecause the fact that they mature faster means that your money will be available to you sooner, and that would allow you to take the money from the matured CD and put it into a new one should interest rates change in a favorable way.
To learn more about certificates of deposit and the barbells strategy forCDs, be sure to call or meet with your financial advisor and go over the topic in as much detail as you need in order to make sure you understand the pros and cons.