Definition
A bond ladder is a strategy of buying bonds with different maturity dates spread evenly over time. As each bond matures, proceeds are reinvested in a new long-term bond, maintaining the ladder. This provides regular income, reduces interest rate risk, and ensures ongoing liquidity.
Example
Build a ladder with $10,000 in bonds maturing each year for 10 years. Each year, reinvest the maturing bond into a new 10-year bond.
FAQ
What is Bond Ladder?
A portfolio of bonds with staggered maturity dates.
Why is Bond Ladder important?
Bond Ladder helps investors evaluate fixed income and make more informed decisions.
Related Terms
Maturity Date
The date when a bond's principal is repaid and interest payments cease.
Reinvestment Risk
The risk that future cash flows will be reinvested at lower rates.
Interest Rate Risk
The risk that bond prices will fall when interest rates rise.
Income Investing
A strategy focused on generating regular cash flow from dividends and interest.