a portfolio of fixed income securities
a portfolio of similar amounts and types of bonds, maturing at several different dates in the future
a portfolio of similar amounts and types of bonds that mature at several different dates
a strategy that attempts to minimize risks associated with fixed-income securities while managing cash flows for the individual investor
a way to manage interest rate risk and take advantage of positive moves when available
(Laddered Portfolio) A bond ladder is a portfolio of bonds that have staggered maturities. For example, rather than invest $100,000 in a 5 year bond, an investor might choose to invest in 4 blocks of $25,000 maturing in 2, 4, 6, and 8 years. This enables the investor to diversify in terms of default risk and reinvestment risk.
A series of bonds with increasing maturities, often spaced one year apart.
(Laddered Portfolio) — A portfolio of bonds with staggered maturity dates. Suppose you had $100,000 to invest in bonds. By using the bond ladder approach, you could buy five different bonds, each with a face value of $20,000; however, each would have a different maturity date. One might mature in one year, another in three years and the remaining bonds might mature in five-plus years. If interest rates go up, you can take advantage of it when your one-year bond matures. But, if rates go down, the effect on your portfolio will be minimized because the other bonds in your portfolio will continue earning higher interest.
