Use cash-flow timing to choose ladder rungs instead of making a rate bet.
The setup Victor needs to fund three office-move payments over three years. The temptation is to chase the single highest yield instead of matching the actual cash dates. The risk is selling before maturity if a long bond is used for near-term cash. The ladder principle Match rungs to cash dates Start with when principal is needed. Then choose maturities and issuer mix that reduce forced selling and concentrated reinvestment. Shortcut Buy the single highest yield and hope timing works. The portfolio funds the plan without a forced sale. Yield is useful only after the maturity schedule fits the liability.…
Sign up free — one personalized lesson every day, matched to your role and goals.
Already have an account? Sign in