Dumbbell

AAA

DEFINITION of 'Dumbbell'

A method of investing in bonds so that the majority of an investor's portfolio consists of short-term, low-risk bonds and a small percentage of high-risk, long-term bonds. A dumbbell allows investors to split his or her risk between high- and low-risk investments while capitalizing on the highest possible returns.


Also called the barbell strategy.

INVESTOPEDIA EXPLAINS 'Dumbbell'

This strategy is called a dumbbell or barbell because of the way the maturity of the bonds would look on a timeline. The short-term bonds mature near the beginning of the timeline, a long period with no maturity, and then the long-term bonds mature towards the end of the timeline.

RELATED TERMS
  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Bunny Bond

    A type of bond that offers investors the option to reinvest coupon ...
  3. Maturity Date

    The date on which the principal amount of a note, draft, acceptance ...
  4. Dry Powder

    A slang term referring to marketable securities that are highly ...
  5. Next Generation Fixed Income (NGFI) ...

    A Next Generation Fixed Income (NGFI) manager is a fixed income ...
  6. Next Generation Fixed Income (NGFI)

    Next generation fixed income is an innovative approach to investing ...
RELATED FAQS
  1. Which asset classes are the most risky?

    Equities is the riskiest class of assets. Dividends aside, they offer no guarantees, and investors' money is subject to the ... Read Full Answer >>
  2. How do you find accrued interest on a bond?

    A bond is a debt instrument issued by a company, government agency or municipality to raise money. Interest payments are ... Read Full Answer >>
  3. What are the main disadvantages of fixed income securities?

    Fixed-income securities attract investors because they provide guaranteed returns in the form of fixed, regular cash payments. ... Read Full Answer >>
  4. Which factors most influence fixed income securities?

    The main factors that impact the prices of fixed income securities include interest rate changes, default or credit risk, ... Read Full Answer >>
  5. Does the S&P 500 index include dividends?

    The S&P 500 index includes dividends. As of March 2015, the dividend yield for the S&P 500 was 1.91%. This is below ... Read Full Answer >>
  6. What is the difference between fixed assets and current assets?

    Fixed assets, also known as property, plant and equipment (PP&E), are tangible assets that a company expects to use for ... Read Full Answer >>
Related Articles
  1. Investing

    The Advantages Of Bonds

    Bonds contribute an element of stability to almost any portfolio and offer a safe and conservative investment.
  2. Bonds & Fixed Income

    How Bond Market Pricing Works

    Learn the basic rules that govern how bond prices are determined.
  3. Mutual Funds & ETFs

    The Bond Market: A Look Back

    Find out how fixed-income investments evolved in the past century and what it means today.
  4. Retirement

    Bond Basics Tutorial

    Investing in bonds - What are they, and do they belong in your portfolio?
  5. Bonds & Fixed Income

    Advanced Bond Concepts

    Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration.
  6. Mutual Funds & ETFs

    Pros & Cons Of Bond Funds Vs. Bond ETFs

    Understanding the pros and cons of bond funds and bond ETFs will help you choose the instrument that is best for building your diversified bond portfolio.
  7. Mutual Funds & ETFs

    Pros and Cons: Preferred Stock ETFs vs. Bond ETFs

    A look at the differences between preferred stock ETFs and bond ETFs and when you should invest in one over the other.
  8. Bonds & Fixed Income

    Understanding Negative Rates Of Europe's Central Banks

    We are currently seeing negative central bank deposit rates and government and corporate bonds with negative yields, but there are investors buying into these securities. Why?
  9. Economics

    The Fed's Impact On Emerging Markets

    Higher US interest rates could make it more expensive for emerging market borrowers to service their debt commitments.
  10. Investing

    What’s The Essence Of Smart Beta In Fixed Income?

    In essence, smart beta strategies seek to re-write index rules to capture factors, such as value, quality, or low volatility, in their stock portfolios.

You May Also Like

Hot Definitions
  1. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  2. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  3. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  4. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  5. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  6. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
Trading Center