How to use fixed deposit laddering to maximise your returns

Fixed deposit laddering is an investing strategy that includes dividing a lump sum of money into many FDs with variable maturities (tenures). Rather than investing the entire amount in a single FD, investors split it among several FDs with staggered maturity dates. FD laddering enables consistent access to funds while increasing interest income. Given below are a few pointers from the ICICI Bank website.

Evaluate your financial objectives and investing horizon, or the length of time you intend to stay involved. Consider your short-term liquidity need, future expenses, and risk tolerance. Determine whether your primary focus is income generation, capital preservation or a combination of both.

Divide the overall investment amount into several buckets or parts, each representing an FD with a different maturity period. These deposits are scheduled to develop at varying periods.

Choose maturity periods for each deposit that are consistent with your financial goals. For example, you may have a deposit maturing in six months to schedule your summer family vacation, another in two years, and so on. Carefully plan the distribution of maturity periods. Aim to create a balanced mix of short-term, medium-term and long-term FDs.

Review the maturity dates of your fixed deposits on a regular basis. When the FD matures, reinvest the principle and interest in fresh FDs with longer maturities. This process will be repeated as each deposit approaches its maturity date.