What is a benefit of a laddered bond portfolio?

A laddered bond portfolio consists of bonds with varying maturities, which can help mitigate interest rate risk and provide better protection against shifts in the yield curve. By staggering the maturities, investors regularly have bonds maturing, which can be reinvested at current interest rates as they become available. This structure allows the portfolio to benefit from rising interest rates, as the maturing bonds can be replaced with higher-yielding investments rather than being locked into lower rates for an extended period.

Moreover, in the event that the yield curve experiences twists—where different maturities respond differently to changes in rates—a laddered strategy helps to buffer the portfolio from the impacts of such movements. It provides diversification across various maturities, lessening the overall impact of interest rate fluctuations on the portfolio's value.

The other options either increase exposure to risks or do not accurately capture the benefits that a laddered bond strategy provides. For example, increased callable risk is not a benefit but a potential drawback of certain bonds, particularly if they are callable. Similarly, while single maturities might bring predictability, they don’t provide the flexibility and risk management benefits that a laddered approach achieves. Lastly, reducing total bond holdings is also not a benefit associated with a laddered strategy