Why is the laddered bond portfolio more relevant when bonds are not traded?
I don’t get it. If bonds are not traded, isn’t it hard to buy and sell the bond?
Which is precisely what you have to do in a laddered portfolio.
thats what I dont get. If a bond is not tradeable and I have a laddered portfolio. It should be hard for me to sell and buy bonds that are not traded no?
Think about what happens with a ladder - bonds naturally mature across time and you reinvest in a new bond with a longer maturity. With a ladder, you don’t have to sell. You will have to buy replacement bonds which could be new issues. This is all relative to a bullet and barbell that have to continuously be re-created.
2 Likes
oh okk got it thanks