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If you’re ready to invest in a CD, here’s how to get started:
- Make sure you have enough to invest. Usually, you’ll need at least $500, but there are exceptions.
- Make sure you won’t need your money before the maturity date. Otherwise, you’ll be forced to pay a premature withdrawal penalty.
- Make sure you compare rates. You may get a better rate from a bank if you have other accounts with them, such as a checking account.
After shopping around, filling out the paperwork in person or online is easy. You write a check for the amount you want to invest and fill out some forms supplied by the financial institution you’ve decided upon.
If you’re unsure about how much to put in a CD and for how long, consider the “laddering” strategy. With laddering, you divide up your investment and spread it among CDs with different maturity dates. Laddering helps you avoid locking up all of your money at what might turn out to be an extremely low interest rate and it ensures that some of your money is available without a penalty at regular intervals.
For example, if you have $5,000 to invest, you might invest $1,000 in five CDs with different maturity dates. As each CD comes due, you can commit to longer terms if interest rates are higher and you don’t need the money. When you ladder CDs, you should arrange for them to mature on a regular basis, so some of your money will be available to spend or reinvest.
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