Bond laddering spreads maturities across time — some bonds mature each year, giving you regular liquidity and reducing reinvestment risk. Barbell strategies hold only short and long bonds, skipping the middle.
Answer: Spreading bond maturities evenly over time. A ladder staggers maturities so bonds mature regularly — providing liquidity and reducing timing risk.
Answer: Maturing bond proceeds must be reinvested at lower rates. If rates fall, when your bond matures you have to reinvest at lower yields — this is reinvestment risk.
Answer: Short-term and long-term bonds, but not medium. The barbell uses short-term bonds for liquidity and long-term bonds for higher yield, skipping medium maturities.
Answer: Short-duration bonds and bond ladders. Short-duration bonds lose less value when rates rise, and ladders let you reinvest at higher rates as bonds mature.
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