Laddering would mean investing money in purchasing different Certificates of Deposit, which matures at different times. In simpler words, it would mean keeping the eggs in different baskets. This evens out heavy loss if the interest rates in market fall or the deposit’s maturity does not coincide with good market performance.

It is wise to have deposits with variation in its term and corresponding rates of return since market performance can not be predicted accurately. A deposit may be expected to grow and yield the highest return. If the market crashes or does not perform as well as forecasted, in spite of quoting the highest return, such deposit may yield less.

Laddering would average the returns from different deposits. The gain may be lesser than the highest yielding deposit, but any crash in the market rates will not let the deposits go in to a complete loss. One can also avoid paying a penalty for foreclosing a deposit if the money is urgently required.

Such distribution will allow one to re-invest in well performing securities on maturity of a deposit, have liquidity of funds with money maturing at different times and avoid constant worry about futuristic market trends which directly affect the performance of deposits.

To maximize gains, one might consider it wise to invest in the deposit offering highest return for the longest term if the market is at an all time best with return rates. Since the market can not be predicted accurately, one might end up missing a better opportunity if the market performs better in the subsequent year.