“Laddering” is a good way to hedge your bond portfolio against any sudden change in interest rates. After all, it’s much like the concept of dollar cost averaging into stocks.
It works like this: You buy bonds with various maturities. Then, as they mature, you re-invest the proceeds into new bonds at the highest rung of the ladder (i.e. with the longest maturities).
The approach allows you to always put some money to work at current rates while protecting other portions of the portfolio. So if rates are falling, you have some of your money in longer-dated bonds. If rates are rising, you get to keep buying at higher and higher rates.
No, you never get to plow all of your money in at the exact right time. But rarely can anyone time markets so perfectly anyway.
Learn more about “Laddering” through dividend investing strategies.
To your dividend investing success,
InvestingInDividends.com
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