Certificates of deposit offer a lot of safety but are about as stingy as they have ever been, with the 12-month yield averaging a mere 1.328 percent, according to the BankingMyWay.com survey. Making it worse, yields on the whole spectrum of CDs, from three months to five years, fell over the past week.

Under these conditions, the heart of any CD investing strategy must be keeping options open, so you can pull your money out of a low-yield CD and put it into a more generous one when rates go up. There are four ways to do that, each with pros and cons.

The first is the simplest -- invest in short-term CDs so you can get at your money in only a few months at most, assuring you won’t miss out on better deals for very long.

You won’t make much money on three-month CDs, which average around 0.69 percent, or six-month ones, averaging around 0.985 percent, but you’ll be able to get your money fairly quickly, without facing an early withdrawal penalty.

In the second strategy, you get a better yield investing in a CD with a longer term, then swallow the penalty to withdraw early and reinvest.

Typical penalties are loss of all interest on 30-day CDs, three month’s interest on two-month to 18-month CDs, and six months’ interest on CDs with longer terms. Rules vary, so check before you buy.

Third, you can invest in a flex or step-up CD that will increase its yield as conditions change, eliminating the need to jump to a newer, more generous CD.

On first glance, this seems like the best approach. But there’s a catch: flexible CDs generally pay less.

Bank of America (Stock Quote: BAC), for example, offers an 18-month Opt-Up CD that starts at 2.08 percent.

Anytime after the first six days, you can choose to switch the initial rate paid by new Opt-Up CDs. But Discover Bank (Stock Quote: DFS) pays 2.43 percent on its 18-month CD, which has no opt-up feature. AIG Banks pays 2.48 percent.

Also, the Bank of America CD requires a minimum deposit of $10,000, while Discover and AIG (Stock Quote: AIG) demand only $2,500.

To figure which strategy would work best for you, use the BankingMyWay.com search tool to find CDs with the best rates, then test each option with the Certificate of Deposit Calculator. Unfortunately there’s a wild card: you just don’t know what future rates will be.

But let’s start with the numbers we have. Put $10,000 into the three-month CD at 0.69 percent, automatically reinvest in an identical CD every three months, and you’ll have $10,069 after a year, assuming daily compounding.

Buy the Opt-up CD at 2.08 percent and you’d have 10,210 at the end of a year.

Buy the 18-month AIG CD at 2.48 percent and you’d have $10, 251.

Now suppose all rates jumped by half a percentage point in six months.

The investment in three-month CDs would grow to $10,095 after a year, assuming you stayed with three-month CDs, which started paying 1.19 percent after six months. (Of course, you could switch that cash to a longer-term CD paying more.)

With the Opt-up CD jumping to 2.58 percent after six months, you’d have $10,277 at the end of the year.

Choose the AIG CD and withdraw after six months and you’d lose the $63 earned in months four through six.

Reinvest the remaining $10,062 at the new, higher rate of 2.98 percent, and you’d end up with $10,213.

With these figures the Opt-up CD looks like the best deal. But changing the assumptions about future yields would produce different results.

Which brings up the fourth option: CD laddering. That means buying several CDs with different maturities to get high yields from long-term CDs and easy access to cash with short-term ones, avoiding early withdrawal penalties when you’re ready to invest. Use the CD Ladder Calculator to experiment with that approach.

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