Bond laddering

Finance

This refers to an investment strategy where bonds with different maturity dates spread out into the future are used to build an investment portfolio. This is done in order to contain risk while reinvesting the money. When a certain bond investment matures, an investor looking for further returns has to find an alternative investment that would yield returns at least equal to his previous investment. If all bonds in his portfolio mature at the same time, it increases the amount of money that is exposed to reinvestment risk. This risk can be significantly minimised by diversifying investments across time.