A Bond Ladder is a type of fixed-income investment strategy in which each individual bond in the portfolio has a different maturity date. This allows an investor to reduce their interest-rate risk, boost liquidity, and spread credit risk. It is preferable to buy a number of smaller bonds with various maturity dates as opposed to buying a single large bond.One reason investors use this strategy is because it can help them manage their interest-rate risk exposure. When short-term rates rise, the prices of longer-term bonds fall (and vice versa). If all of an investor's money was invested in one long-term bond, that position would be hurt much more by rate swings than if the money was spread out over several shorter term instruments."Another benefit of using bond ladder is that it can improve liquidity by making it easier for investors to sell specific bonds when they need cash rather than having to sell the entire portfolio at once. And finally, spreading credit risk across multiple issuers helps mitigate potential losses if one company or government goes bankrupt."
