By: Aim CU Solutions & Millennium Corporate Credit Union
We all know the saying, “Keep it simple.” It applies to many things including your 
investment portfolio. The simple approach to investing is Laddering.
A Ladder investment strategy involves spreading out investments across a range of maturity dates, so investments mature at staggered intervals. A typical ladder for credit unions is 1 to 5 years, based on their loan-to-share ratio plus their risk tolerance.
Investing with a Ladder approach enhances liquidity because it allows for a consistent and staggered stream of maturing investments. As bonds/CDs mature, credit unions have access to cash in the form of maturing investments which provides liquidity without relying on selling investments or borrowing. During the pandemic, some credit unions chose to stray from their investment ladders to chase yield. Some of those same credit unions are now experiencing tight liquidity and are not able to sell investments due to current market prices. Staying true to a Ladder investment approach can help you manage liquidity risk and provide a more predictable income stream. A Ladder strategy helps mitigate the impact of market volatility and interest rate fluctuations on your overall portfolio.
While there are many benefits to adopting a Ladder investment strategy, it can be difficult at times to stay the course especially when the yield curve is inverted, as it currently is. An inverted yield curve occurs when short-term rates are higher than longer-term rates. This typically unusual scenario is often considered a signal to an economic downturn or recession. When the yield curve inverts, it is often challenging to continue with your Ladder strategy because you want to benefit from higher short-term rates or park the cash in your Millennium Corporate overnight liquidity account where you can earn 5.25-5.50%* which is higher than most current investments. Although tempting, there is still reason to continue the Ladder strategy – you’ll benefit from locking in higher interest rates for a longer period when rates start to decline.
When it’s all said and done, a Ladder investment strategy is a structured, versatile approach that can help balance risk and return while providing income and liquidity benefits. Simple & Effective.
If you’d like help structuring your investment Ladder with CDs and Marketable Securities, please contact an AIM Financial Analyst at aim@aimcusolutions.org or call 855.882.8474.
*Rates subject to change.
All securities are offered through CU Investment Solutions, LLC. The home office is located at 8500 W. 110th St, Suite 650, Overland Park KS 66210. CU Investment Solutions, LLC registered with the Securities and Exchange Commission (SEC) as a broker-dealer under the Securities Exchange Act of 1934. CU Investment Solutions, LLC is registered in the state of Kansas as an investment advisor. Member of FINRA and SIPC. All investments carry risk; please speak with your representative to gain a full understanding of said risks. Securities offered are not insured by the FDIC or NCUSIF and may lose value. All opinions, prices and yields are subject to change without notice.
