Bond Ladder Strategy | Handling Interest Rate Uncertainty
For investors, capital preservation and a steady income stream are key benefits of having an allocation to fixed-income investments.
But how can you reduce risk amid uncertainty about interest rate trends?
With a Bond Ladder strategy.
Benefits of a Bond Ladder
A Bond Ladder is a structured portfolio of bonds that mature at different times in the future.
- Capital Preservation – Offsets uncertainty from changing interest rates with a diversified portfolio of bonds maturing over the short, medium, and long term.
- Potential for higher yields – Benefits from rising interest rates by seizing opportunities to reinvest when interest rates rise.
How a Bond Ladder Strategy Works
- Janet has a balanced portfolio with approximately 40% allocated to fixed income
- Interest rates are currently rising
Janet’s advisor recommends a portfolio that uses a core Laddered Bond strategy complemented by an allocation to High Yield and Emerging Markets Fixed Income securities. The core Bond Ladder portion is invested in a concentrated set of bonds with five different maturity dates.
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