← Back to The Ledger

The Bond Ladder Is Quietly the Best Idea in Fixed Income

Treasury yields are unusually generous. A 5-year ladder locks them in and self-renews without you watching CNBC.

A ladder is just five equal slices of Treasuries maturing one year apart. As each slice matures, you reinvest it in a new 5-year rung. You end up holding a portfolio with an average duration around 2.5 years that yields roughly the 5-year rate.

It beats a bond fund in one specific way: you always get your principal back at maturity. There's no fund manager selling at a loss to meet redemptions during a rate spike.

It loses to a fund in liquidity and convenience. For most investors retired or near it, the trade is worth it.