Is there any rule of thumb for figuring out what term length CD to buy? I would think longer the better ( > 2 years ), but then you run the risk of losing out if rates rise during that time.
I can't see how banks make any money on short-term CD's ( < 1 year ) since there is so much overhead with opening, maintaining and closing each one to make it all worthless to them.
Stay short if you expect rates to rise, long if rates fall. All assuming you have no reason to expect immediate use of the money, and have weighed other options. But do select your bank for soundness.
Do you mean in view of how oddly low interest rates have been the last seven years or so? I think CDs are going to reflect roughly what US Treasuries are doing, so I use the treasury yield curve at
-- Go out maybe three years, in a ladder with rungs either 6 months or a year apart. This assumes the economy will recover a lot within three years, such that for one stocks are high and the Fed is seeking to encourage more investing in bonds and fight inflation, and so raises interest rates.
-- Keep it all in an FDIC insured money market account until higher CD interest rates are available.
-- Put it all in 1-year CDs, assuming they really are paying a lot more than a money market account.
-- USAA federal savings bank offers one-time adjustable CDs. The starting rate will be lower than a fixed term CD of the same maturity, but the flexibility may justify this choice.
-- Some mix of the above; diversify to optimize returns in the face of so much uncertainty.
More generally, I think
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