Explore the benefits of laddering

Bond investors have endured a whipsaw environment in interest rates that has introduced more unwanted volatility to portfolios. And with continued uncertainty over Federal Reserve rate policy, inflation, and a potential recession, fixed-income investors are looking for stability.

Therefore, it’s no surprise we’ve seen renewed interest in defined maturity ETFs and how they can be used to build efficient bond ladders.
 

Bond ladders for some income predictability

Defined maturity ETFs can be used to build bond ladders designed to help create income stability regardless of the direction of interest rates.

Bond ladders are portfolios of bonds with sequential maturity dates. As bonds reach maturity, the proceeds can be used to fund a specific expense, such as a college tuition payment or tax bill, or reinvested in new bonds with longer maturities.

Bond ladders that hold bonds to maturity may be particularly appealing to investors looking for some income predictability in volatile interest rate environments.

First, ladders can be customized to target specific maturity and duration profiles, giving investors more control over the portfolio’s sensitivity to changes in interest rates. Most traditional fixed income mutual funds and ETFs typically have a perpetual duration target, making them more sensitive to changes in interest rates.

With bond ladders, when interest rates are rising, investors reinvest any proceeds from bonds maturing from the ladder into new bonds with higher rates. Meanwhile, if rates fall, investors can choose to reinvest less of the maturity proceeds into new bonds with lower rates. And when rates are falling, investors may have the benefit of existing bonds that were potentially purchased at higher rates than currently.
 

Using BulletShares ETFs in bond ladders

BulletShares defined maturity ETFs can help investors build bond ladders more efficiently because they combine the potential benefits of individual bonds and exchange-traded funds. BulletShares ETFs let investors avoid the trading costs, research, and time of building bond ladders with hundreds of individual bonds.

Defined maturity ETFs like BulletShares have termination dates like individual bonds and they also combine the advantages of ETFs such as diversification¹, liquidity ², and transparency.³

BulletShares ETFs provide targeted exposure to investment-grade bonds, high-yield corporate bonds, and municipal bonds.

You can use our interactive tool to learn how to build customized bond ladders with BulletShares ETFs with specific investment amounts, bond asset classes, and maturity ranges.