laddering business definition

An investment strategy in which bonds or certificates of deposit that have different maturities are assembled for a portfolio. For example, an investor with $50,000 might invest $10,000 in bonds with a two-year maturity, $10,000 in bonds with a four-year maturity, $10,000 in bonds with a six-year maturity, and so forth. Principal from matured bonds or CDs is either spent or reinvested in additional bonds or CDs with longer maturities at the top of the ladder. Also called liquidity diversification, staggering maturities.