CD investing strategies: bullets

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Ladders and barbells are CD investing strategies that set up multiple CDs to come due at different times. But for situations where you want all your money to come due at once, there’s another CD investing strategy: bullets.

“It’s almost like dollar cost averaging,” says Robert Laura, partner at Synergos Financial, in Howell, Mich.

“You buy a 10-year and then the next year you buy a nine-year but it matures at the same time as the first CD,” he says.

With a bullets strategy the maturity date stays the same but the years leading up to it change as time goes on. The idea is to get an average higher yield over time.

“In this environment it’s not really useful,” says Laura.

Use this calculator to figure out your own CD investing strategy.

The term bullet can have another meaning as well.

In bonds, it describes a maturity type that is noncallable.

“In the old days once a bond became callable it remained that way but then the underwriters and bankers structured one-time calls,” says Donald Cummings Jr., managing partner at Blue Haven Capital, in Geneva, Ill.

“Maybe it’s a 10-year bond with a five-year call. That’s one time. If they don’t call it then it’s a bullet for the following five years,” he says.

When you invest in CDs do you use an overarching strategy or do you buy your CDs as individual investments? Have you ever used a bullets strategy with CDs or bonds?