L
Lyreco
Guest
I've about €80k as part of a larger portfolio that I want to put into low risk bonds or fixed term deposits. My intention is to set this up as a CD ladder. The goal here is to earn a little on this money while making sure that I can take advantage of potential rising interest rates over the coming years. A separate part of the portfolio will be kept in cash for short-term & day to day access so the €80k can be left alone to do it's thing.
The ladder would most likely be composed of medium and long term 3,4,5,6 and/or 10 year State Savings products. In addition I'd use short term deposit accounts or regular saver accounts such as the KBC Extra Regular Saver (2.1%), KBC Extra 12 Month Fixed (0.65%), EBS Family Savings Account (1.75%) for the first 1-3 years also.
There are two questions:
(1) Whether to take the traditional even-split approach to the ladder (i.e. equal amounts in each product) or some other distribution?
(2) Is it worth putting anything into the 10 Year National Solidarity Bond or just to stick with a 5-year ladder. My calculations show that even if you were to take a lower rate for 5 years, if the interest rate increased sufficiently more than the currently 1.5% AER available then you would be at a minimum no worse off.
For example €10000 invested in the 10 Year Bond would return €11600 at maturity.
Putting the same €10000 into the 5-Year Savings Cert @ 0.98% AER followed by a 5 year fixed term at 2.1% net (3.33% gross) would return €11649
Any thoughts? I guess if there was any significant rise after 5 years, the 10-Year bond could be withdrawn prematurely.
The ladder would most likely be composed of medium and long term 3,4,5,6 and/or 10 year State Savings products. In addition I'd use short term deposit accounts or regular saver accounts such as the KBC Extra Regular Saver (2.1%), KBC Extra 12 Month Fixed (0.65%), EBS Family Savings Account (1.75%) for the first 1-3 years also.
There are two questions:
(1) Whether to take the traditional even-split approach to the ladder (i.e. equal amounts in each product) or some other distribution?
(2) Is it worth putting anything into the 10 Year National Solidarity Bond or just to stick with a 5-year ladder. My calculations show that even if you were to take a lower rate for 5 years, if the interest rate increased sufficiently more than the currently 1.5% AER available then you would be at a minimum no worse off.
For example €10000 invested in the 10 Year Bond would return €11600 at maturity.
Putting the same €10000 into the 5-Year Savings Cert @ 0.98% AER followed by a 5 year fixed term at 2.1% net (3.33% gross) would return €11649
Any thoughts? I guess if there was any significant rise after 5 years, the 10-Year bond could be withdrawn prematurely.