Business / Taxes / Laddering: Laddering is an investment strategy that calls for establishing a pattern of rolling maturity dates for a portfolio of fixed-income investments. Your portfolio might include intermediate-term bonds or certificates of deposit (CDs). For example, instead of buying one $15,000 CD with a three-year term, you buy three $5,000 CDs maturing one year apart. As each CD comes due, you can reinvest the principal to extend the pattern. Or, you could use the money for a preplanned purchase, have it available to take advantage of a new investment opportunity, or use it to cover unexpected expenses. You can use laddering to pay for college expenses, with a series of zero coupon bonds coming due over four years, in time to pay tuition each year. And if you ladder, you can avoid having to liquidate a large bond investment if you need just some of the money or reinvest your entire principal at a time when interest rates may be low.
Business / Finance / Barbell Strategy: A fixed income strategy in which the maturities of the securities included in the portfolio are concentrated at two extremes. MORE
Business / Finance / Reinvestment Risk: The risk that proceeds received in the future may have to be reinvested at a lower potential interest rate. MORE