Locking yourself info a long term (for example: 5 years) CD account is usually a great, secure way to put some money away on the side and earn some good interest from it. The problem is the current interest rates on CDs aren’t paying very high. What should you do is the question.

BankRate.com offers a trend index which is updated on a weekly basis. They give a full analysis on current interest rates and the future trends; this is a great place to start. The problem with investing in a CD is to earn a higher interest rate; you need to lock into a long term. That longer term means 2 things: 1. you have no access to your money for a longer period of time, and 2. you are susceptible to being “long and wrong”.

The solution: well there are a few ways to manage your risk when deciding to invest in a long term CD, 2 of which I will list and explain.

I. Invest in a bump-up CD.
A bump-up CD is the same as any regular CD investment except for one thing: These CDs allow you to take advantage of higher interest rates by having the bank “bump-up” your interest rate if rates increase. Most banks only allow 1 “bump-up” per CD and usually the depositor is given only a short amount of time after the initial investment to take advantage of this.

II. Build a ladder CD portfolio.
A CD ladder “allows you to take advantage of interest rates spread over several maturities without sacrificing liquidity.” For in in-depth look and analysis on CD ladders, check this site: http://www.bankrate.com/brm/news/sav/20010521b.asp