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|Can you explain "laddering" techniques?
By The-Adviser.com -
||New York - If you
want to reduce the risk of inflation on your investment portfolio, you should consider
using a technique known as "laddering."
Laddering is a method whereby your income producing investments such as bonds or certificate of deposits maintain a rolling maturity date. For example, you would make several investments that mature on different dates (i.e, six months). This allows you to close out the initial investment and re-invest proceeds in the current interest rate environment.
If interest rates are higher, you can invest in longer-term instruments and you can invest in shorter-term investments when interest rates are lower. Laddering also gives you the benefit of having specified investment mature simultaneously with the need of cash for various things such as college expenses or a wedding.
Laddering is a method to reduce the long-term impact of inflation.
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