FD Ladder

Full form: Fixed Deposit Laddering

Savings & Deposits

FD laddering is a strategy of splitting a large sum into multiple FDs with different maturity dates (e.g., 1, 2, 3, 4-year FDs). This provides regular liquidity at each maturity, reduces reinvestment risk, and averages out interest rate changes over time.

In detail

Example with Rs 4L:nFD 1: Rs 1L for 1 year at 7.0%nFD 2: Rs 1L for 2 years at 7.2%nFD 3: Rs 1L for 3 years at 7.4%nFD 4: Rs 1L for 4 years at 7.5%nEach year one FD matures. The maturing FD is reinvested for 4 years at current rate.nnBenefit: if rates rise, you reinvest at higher rates. If rates fall, you still have locked-in higher rates on longer FDs.

Real-life example

🇮🇳 India example

Anjali has Rs 10L to park for safety. Instead of one Rs 10L FD for 5 years, she ladders: Rs 2L each in 1, 2, 3, 4, and 5-year FDs. Each year Rs 2L matures -- available for emergency or reinvestment at prevailing rates. Never fully locked out of her own money.

Frequently asked questions

Is FD laddering better than a single long-term FD? ▼

Yes for most investors. Laddering provides liquidity at each step, reduces reinvestment risk, and gives access to current rates without penalty. Only downside: slightly more administrative work to manage multiple FDs.