Frequently Asked Question
How do I use a barbell strategy?
The barbell strategy is an investment strategy that involves purchasing both short-term and long-term bonds and securities but no intermediates (such as in a "laddered" approach).
The thinking behind this strategy is to help you, as an investor, diversify your portfolio and increase the probability of higher returns. The long-term investments will provide the benefit of higher interest rates and increasing value over time. Maintaining some holdings in short-term bonds will provide you with flexibility to take advantage of interest rate changes.
When using this strategy, you'll want to keep your long-term bonds but be poised to make changes to your short-term investments (buy or sell as needed) if interest rates change. Evaluate your portfolio's performance and then consider selling and reinvesting your long-term investments when they reach approximately the half-way point to maturity.
For more on this read, A Guide to Portfolio Construction.
This question was answered by Katie Adams.
The thinking behind this strategy is to help you, as an investor, diversify your portfolio and increase the probability of higher returns. The long-term investments will provide the benefit of higher interest rates and increasing value over time. Maintaining some holdings in short-term bonds will provide you with flexibility to take advantage of interest rate changes.
When using this strategy, you'll want to keep your long-term bonds but be poised to make changes to your short-term investments (buy or sell as needed) if interest rates change. Evaluate your portfolio's performance and then consider selling and reinvesting your long-term investments when they reach approximately the half-way point to maturity.
For more on this read, A Guide to Portfolio Construction.
This question was answered by Katie Adams.
by
Katie Adams
Katie Adams is a freelance commercial writer, marketing and public relations professional with 18 years experience. She has written extensively about financial issues and was previously Director of Regional Communications for Fannie Mae. Adams earned a B.A. from the College of William and Mary and lives with her family in Virginia Beach, Virginia. She is actively involved in international philanthropic work to improve orphan care and accelerate sustainable development in Central America. Visit her website at www.katieadams.homestead.com.
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