Laddering

Laddering

Laddering is an investment technique that requires investors to purchase multiple financial products with different maturity dates.

Benefits

Laddering avoids the risk of reinvesting a big portion of assets in an unfavorable financial environment. For example, a person has both a 2015 matured CD and a 2018 matured CD. If the interest rate drops fairly low in 2015, half of the income is locked in until 2018.

Laddering can free up capital as needed. A person may purchase a shorter term bond in the event that he needs the capital soon to fund his children's tuition while purchasing other longer term bonds that mature later as retirement spending in a more favorable rate, assuming the economy is experiencing a normal yield curve.

Other Usage

Laddering also describes a process where, in order to purchase shares at a given price, investors must also agree to purchase additional shares at a higher price. This artificially inflates the price of the stock and allows insiders to buy at the lower price, with a guarantee that they will be able to sell at a higher price. This practice is illegal.

References

* [http://financialplan.about.com/cs/investing/a/LadderingCDs.htm Laddering Certificates of Deposit]
* [http://www.schwab.com/public/schwab/research_strategies/bonds_fixed_income/laddering?cmsid=P-981774&lvl1=research_strategies&lvl2=bonds_fixed_income Bond Laddering] Charles Schwab Corp. website.


Wikimedia Foundation. 2010.

Игры ⚽ Поможем написать реферат

Look at other dictionaries:

  • Laddering — ist eine Interview Methode in der Marktforschung, bei der durch gezieltes Nachfragen die Zusammenhänge zwischen Produktmerkmalen und deren subjektiv bedeutsamen Nutzen aufgedeckt werden soll. Mit dem Begriff „Laddering“ beschreibt man eine… …   Deutsch Wikipedia

  • Laddering — The promotion of inflated pre IPO prices for the sake of obtaining a greater allotment of the offering. Laddering is an illegal IPO practice in which the underwriter engages in the sale of IPO shares to clients with the implicit agreement that… …   Investment dictionary

  • laddering — Apoptotic cells show a regular pattern of oligonucleotide sizes on electrophoretic gels; the ladder like arrangement is a consequence of the cleavage of the DNA strand between nucleosome beads by endonucleases as part of the process by which cell …   Dictionary of molecular biology

  • Laddering —    The allocation of shares in an initial public offering to subscribers who agree to buy more of the issue at a higher price once the issue is public. The underwriter thus helps to ensure that the price will rise after the issue, and the… …   Financial and business terms

  • Laddering — ⇡ Befragung, deren Grundlage immer weitergehende Fragen nach den Gründen für die vorhergehende Antwort sind. Jeder Antwort folgt eine weitere „Warum Frage“, bis der Befragte nicht mehr antworten kann. L. dient dazu, Marketing Strategien zu… …   Lexikon der Economics

  • laddering — lad·der || lædÉ™(r) n. structure used for climbing which consists of two parallel bars connected by a series of rungs; means by which one moves to a higher level; tear in a stocking (British) v. ascend a ladder; install ladders; cause a run in… …   English contemporary dictionary

  • laddering — / lædərɪŋ/ noun US 1. the action of repeatedly buying shares in a newly launched corporation so as to force up the price, then selling the whole investment at a profit 2. the action of making a series of investments which mature at different… …   Dictionary of banking and finance

  • laddering — noun ( s) : ladders or material for ladders …   Useful english dictionary

  • DNA laddering — (left) visualised in an agarose gel by ethidium bromide staining. A 1 kb marker (middle) and control DNA (right) are included. DNA laddering is a phenomenon seen in laboratory tests; it is a sensitive indicator of programmed cell death …   Wikipedia

  • Bond Laddering — A portfolio management strategy and model for investing in fixed income that involves purchasing multiple bonds, each with different maturity dates, in order to achieve the following goals: Decrease interest rate risk by holding both short term… …   Investment dictionary

Share the article and excerpts

Direct link
… Do a right-click on the link above
and select “Copy Link”