Choosing the length of certificates of deposit (CD) is an important decision. The issues of liquidity and the future direction of interest rates can make the decision difficult. Longer maturity certificates usually provide the highest returns, but they also tie up your funds longer. Shorter maturities provide flexibility to take advantage of rising rates, but usually with lower returns. Ideally, you want the highest current return coupled with the ability to invest at higher rates if interest rates rose.
Creating a ladder of maturities is a way to create a portfolio of certificates that will put you in a position to earn good rates and invest at higher rates if interest rates rise. With this strategy, you divide your funds into pieces and buy equal amounts of different maturity certificates across a set timeframe.