Bond laddering
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Bond laddering is an investment strategy that minimizes risk from interest rate movements by creating a portfolio with bonds that mature at regular intervals. This provides a steady cash flow and spreads out reinvestment risk. With bond laddering, if interest rates change, only a portion of the portfolio is impacted each time rather than the entire portfolio maturing at once. While it may lower overall returns, bond laddering reduces the effect of reinvestment risk compared to having all bonds mature simultaneously.
![[object Object],[object Object],Bond investing is much like a game of musical chairs in which bond prices move to the tune of interest rates. Sometimes you might feel that you have no control over what happens to your bond portfolio with the future movements in interest rates. Copyright © 2009](https://image.slidesharecdn.com/bondladdering-111109052300-phpapp02/85/Bond-laddering-1-320.jpg)
![Understanding Bond Laddering – By Prof. Simply Simple TM ,[object Object],[object Object],[object Object],Copyright © 2009](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)
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Bond laddering
- 4. This kind of strategy ensures that your entire bond portfolio does not mature on the same date.
- 7. It seems like not putting all your eggs in the same basket. Likewise, your entire bond portfolio should not mature on the same date.