Masters in Business
At The Money: Building A Bond Ladder
Oct 23, 2024
Karen Veraa, Head of iShares US Fixed Income Strategy at BlackRock, shares insights on navigating the unpredictable bond market. She discusses the benefits of building a bond ladder, which helps secure income and mitigate interest rate risks. The conversation highlights how to use ETFs for diversification and professional management in bond investing. Veraa also explores aligning bond ladders with retirement plans and offers strategies for constructing them using various asset classes to optimize returns.
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Quick takeaways
- Building a bond ladder allows investors to manage interest rate risk while securing a predictable income stream through staggered maturities.
- Using ETFs for bond ladders enhances diversification and liquidity, making it easier for investors to meet specific income needs efficiently.
Deep dives
The Benefits of a Bond Ladder
A bond ladder is a strategic investment approach that helps investors manage interest rate risk by spreading investments across various maturities. By creating a ladder, investors can enjoy a predictable income stream, as bonds mature each year, allowing the capital to be reinvested. This method reduces the need to time the market and mitigates the risks associated with fluctuating interest rates, as one can always choose to reinvest in the next rung of the ladder. This technique is especially useful for those with specific financial goals or liabilities, as it provides stability and flexibility in managing cash flow.
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