Bond Ladder
An investment strategy of buying bonds with staggered maturities to manage interest rate risk and provide regular income.
What is Bond Ladder?
A bond ladder is a fixed-income investment strategy in which an investor purchases a series of bonds with equally spaced maturity dates — for example, bonds maturing in 1, 2, 3, 4, and 5 years. As each bond matures, the proceeds are reinvested into a new bond at the longest rung of the ladder. This approach reduces interest rate risk (no single large position is exposed to one rate environment) and provides regular income as bonds mature. Bond ladders are popular with retirees and income-focused investors who want predictable cash flows without the need to time the bond market.
Example
An investor with $100,000 builds a 5-year bond ladder by allocating $20,000 each to bonds maturing in 2026, 2027, 2028, 2029, and 2030. In 2026, the first $20,000 matures and is reinvested into a new 5-year bond maturing in 2031. This rolling strategy means the investor always holds bonds with 1 to 5 years to maturity and receives $20,000 in cash each year.
Source: FINRA — Bond Laddering