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Tipping Point: What are advantages of laddering? All you need to know

Laddering is also useful for ensuring that you meet your investment objectives

Business Standard 

Black money
Black money

What is

refers to the of having a collection of in your that mature at different points of time.

What are its advantages?

Imagine that you have a comprising fixed deposits, all of which will mature in three years. Such bunching up of the maturity date can lead to reinvestment risk. Interest rates could be at a low point that year, forcing you to reinvest your money at those low rates. To avoid this, you should ladder your investments. Interest rates tend to move cyclically. By your investments, you can reinvest your fixed-income corpus at different points of time, thereby averaging out the returns you earn.

is also useful for ensuring that you meet your investment objectives. Invest the money in a laddered manner, so that each instrument in your matures just when you need it.

First Published: Thu, February 01 2018. 05:51 IST
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