Certificate Accounts: 5 Smart Investing Moves

Savvy savers usually employ more than just a traditional savings account to park their cash. They like their money to work for them, investing in accounts that grow their nest egg—like certificates.

If you’re considering investing in certificates, there is definitely an art to maximizing your return. Boost your earnings with these tips:

Timing is everything. Smart savers understand that higher rates mean a better return on certificates. Keep up on what’s happening with the Federal Reserve and time your new certificate as best you can to get the best deal.

Choose short- and mid-term lengths or those with easy exits. When rates are stable, it makes more sense to put your money into long-term certificates to get the highest dividends. But, when rates are increasing, you don’t want your money tied up for too long. Choose a short- or mid-length certificate, up to three years. This is a reasonable amount of time for your certificate to mature while taking advantage of potential rate increases.

Two-way diversification. Here are two ways to diversify your investments for maximized earnings:

• Maturity dates—Try a laddering strategy. Put money into certificates with 12, 24, 36, 48 and 60-month terms. When the 12-month certificate matures, reinvest it into a new 60-month certificate. Do the same as each matures. This creates a kind of “round robin” effect with one account maturing each year—meaning you’ll have access to some of the money while still benefitting from the higher 60-month dividend rate.




• Investment dates—It can be useful to stagger your investment dates as rates change. For certificates, this usually involves setting up multiple ladders. Set up one soon after one rate increase. Then, maybe three or six months later, if there’s another increase, set up another one—and so on.

Shop around. Many people invest with the financial institution where they do their regular banking. Though incredibly convenient, you may unknowingly pass up a better deal. By the way, if you’re setting up a certificate ladder, don’t be surprised if the best deals (i.e. highest dividend rates) are not all with the same financial institution. It’s fine to create your ladder with products from multiple credit unions and banks. Check rates at several financial institutions before opening your accounts.

Reinvest. Reinvest. Reinvest. If you take all these tips and put them into practice, you’ll undoubtedly have certificates maturing at varying times during the year, over several years. Double down on your strategy—and squeeze even more earnings from these investments—by reinvesting the money as each certificate reaches maturity.

One last piece of advice—take an active role in your investments. Not all financial institutions are created equal. For instance, if you take no action when a certificate matures, the financial institution will automatically roll that money over into a new certificate. Mountain America Credit Union’s policy is to roll it over to the exact same certificate account at the current rate. Other financial institutions, however, may have different policies. Choose no action and you may end up with something that could seriously derail your strategy. Mountain America also offers a grace period to make decisions after the maturity date. Again, this is not something that is offered industry-wide.

If you have more questions, we’d be happy to help. Visit us online, in a branch or over the phone.