The Laddered Approach
The volatility of the fixed-income market over extended periods can make it difficult for the average investor to attain reliable returns. By using a proven, low-maintenance, fixed-income strategy, it is possible to achieve a consistent, long-term return on your invested capital.
The laddered fixed-income portfolio approach to investing allows you to minimize the reinvestment risk associated with both short-term and lump-sum investing. Quite simply, this strategy adopts a long-range outlook and diversifies the maturity structure of the fixed-income investments within your portfolio. This reduces the effects of interest-rate fluctuations on your total return.
Structuring a laddered portfolio with investments in successive maturities allows you to accomplish the following goals with your invested funds:
- Achieve a potentially higher rate of return over time, by consistently "rolling" invested funds out to longer-dated, higher-yielding maturities.
- Maintain short-term liquidity, by always having maturities pending within your portfolio.
- Minimize reinvestment risk. In other words, reduce the risk of having to reinvest all of your funds at a time of low interest rates.
- Allow the flexibility of reinvesting maturing funds out to longer-term, higher-yielding investments during high-interest-rate climates.
There is a large variety of fixed-income investments available today. That variety allows you to choose the securities which best meet your needs with regards to the type of account (taxable or non-taxable), quality, and timing for your current and future income needs.
With the guidance of a professional Investment Advisor, you can implement an investment strategy, such as this one, that will help you achieve a superior rate of return while simultaneously reducing market risks.
Use our Find An Advisor tool to locate a CIBC Wood Gundy Investment Advisor near you and take the first step to achieving the financial future you want.
The information contained herein is considered accurate at the time of posting. CIBC and CIBC World Markets Inc. reserve the right to change any of it without prior notice. It is for general information purposes only.