"laddering" for fixed rate bond saving?

LardyCake

I recently found a description of a method of fixed rate saving on a US site:
Laddering: How to build a CD ladder

If you read this and substitute "fixed rate bond" for "CD" it would presumably be an applicable method to use for fixed rate saving in the UK.

I've never seen any discussion of anything like this method on there boards - does anybody have any observations on this as a savings method?

Bazn

yeah i believe it could work... if only i had enough spare cash to open 5 bonds!

kingmonkey

Sounds like a good idea but...

Wouldn't opening a new 1 year bond each year also average out rate changes?

Biggles

It's basically like the old 'pound-cost averaging' (IIRC that's the right term) for buying shares by drip-feeding funds into them.

It's just a way of reducing the risk of having all your money in at the worst rate. Of couse, it still might not mean they're the right investment for you.

LardyCake

Biggles wrote: »

...it still might not mean they're the right investment for you.

Yes, but on the assumption that fixed rate savings form part of your portfolio, is it a good idea?

dunstonh

Depends on where you are in the interest rate cycle and what you think is going to happen next. It also depends on what liquidity you need with your cash. Fixed term deposits tend to have accessibility only on death.

LardyCake

dunstonh wrote: »

Depends on where you are in the interest rate cycle and what you think is going to happen next.

That is probably what I am trying to get at. The description on the link I gave, hints at this towards the end where it suggests shortening your ladder in a period of prolonged low rates.
I assume that if one thought we were approaching the top of an interest rate cycle then now would be a good time to establish a ladder?

BTW I am assuming in all this that fixed rate savings are forming part of a balanced portfolio and liquidity, access etc etc have all been considered.