A bond ladder is an investment strategy where you buy multiple bonds with staggered maturity dates, typically 1-10 years apart.

As each bond matures, you reinvest the principal into a new bond at the longest maturity, maintaining consistent income.

This strategy provides predictable cash flow, reduces reinvestment risk, and offers built-in liquidity at regular intervals.

Most bond ladders have 5-10 rungs for optimal diversification. 5-rung ladder: Good for 5-year planning horizons, simpler management. 7-rung ladder: Balances diversification with manageability. 10-rung ladder: Maximum diversification, smoothest income, best for long-term investors.

More rungs mean better protection against rate changes but require more initial capital.

Treasury bonds: Safest, no default risk, state tax-exempt, ideal for conservative ladders.

Corporate bonds: Higher yields (2-4% premium), accept credit risk, diversify across companies.

Municipal bonds: Tax-free income for high earners, check AMT implications.

CDs: FDIC insured up to $250k, simpler than bonds, good for smaller portfolios.

Avoid callable bonds which can disrupt ladder structure.

Minimum practical investment is $50,000-100,000 for diversification.

Treasury ladder: $10,000 minimum ($1,000 per bond × 10 rungs).

Corporate ladder: $50,000 minimum ($5,000 per bond × 10 rungs).

CD ladder: $25,000 minimum ($2,500 per CD × 10 rungs).

Bond ETF ladders can start with $1,000 but lose some benefits of individual bonds.

Bond ladders actually benefit from rising rates over time.

While existing bond values decline temporarily, you reinvest maturing bonds at higher rates, increasing future income.

The staggered maturities mean you are constantly capturing new rates.

After one complete cycle, your entire ladder reflects higher rates.

This "dollar-cost averaging" of rates reduces timing risk.

Traditional ladder: Equal amounts in each maturity, steady income, lowest risk, best for retirees.

Barbell ladder: Concentrate in short and long maturities, higher yield potential, more flexibility.

Bullet ladder: Bonds mature around same target date, good for specific future expenses.

Most investors benefit from traditional ladders for predictable income and simplicity.