Masters in Business · Thursday, July 2, 2026
Stephen Lately describes a bond ladder as a strategy to manage interest rate risk and ensure cash flows by investing in bonds with staggered maturity dates. This approach offers investors a sense of control, allowing them to reinvest maturing principal at potentially higher rates if interest rates rise.
“And so I think Barry, this gets to a very popular, long standing practice that advisors and investors have used for years, which is this idea of you know, I'm not going to be able to really predict the evolution and interest rates, and so what I'm really interested in is cash flows. I'm interested in trying to line up some certainty with income, and I don't really want to take a lot of interest rate risks.”
“So a comfortable thing is to create a ladder, which means you buy some amount of bond exposure in every year going out to say five years, and if you're worried then interest rates are rising, you can always just not reinvest and let that ladder roll down, get your par value back at maturity, and then you could take that cash and go elsewhere.”
“So the attractive or ladder is cash flow. You have some certainty in control over over how it evolves and plays out, and that's why they're so popular.”