Hypothetical Limited Term Bond Ladder

In a laddered portfolio, bonds mature every year. As this occurs, the principal proceeds are reinvested at the longer end of the ladder.  This generally occurs at higher interest rates. Because only a small portion of the portfolio matures and is replaced each year, the income stream stays relatively constant.  As a result, your portfolio should include bonds purchased in periods of both high and low interest rates.

Laddering short-term and intermediate-term bonds helps you captures most long-term bond returns with less volatility. For example, a 10-year ladder can produce the yield and return of 10-year bonds.  As a result, it’s five-year average maturity means lower risk. The strategy also smooths out reinvestment risk since money is being reinvested incrementally throughout a full interest rate cycle. The end result is a portfolio with returns close to those of long-term bonds but with substantially less risk. It really doesn’t matter which way interest rates move. With a laddering strategy, it’s possible to get consistent returns. This gives laddering investors a competitive advantage, knowing any time is a good time to build or buy into a laddered portfolio. It’s the smart way to increase a portfolio’s return while minimizing both market and reinvestment risk.

This high-level overview provides information on building your own hypothetical limited term bond ladder.

Get Your Copy Now!

Bond Ladder


Bond Ladder

Please provide your name and email address to download this resource.