What is one characteristic of a laddered bond portfolio?

A laddered bond portfolio is designed to provide cash flows that are diversified across various maturities. This means that investments are spread out over different time periods, allowing for bonds to mature at regular intervals. As bonds mature, investors can reinvest the proceeds or use them for income, taking advantage of interest rate changes over time. This strategy helps mitigate interest rate risk and provides liquidity, making it easier for investors to manage their portfolios.

Having cash flows that are diversified across time helps smooth out potential fluctuations in interest rates. As some bonds mature, the proceeds can be reinvested in new bonds, which may offer higher yields if interest rates rise, while the investor still has access to cash generated from maturing bonds. This characteristic is a key advantage of a laddered bond portfolio, as it combines the benefits of both short-term and long-term bonds without overly exposing the investor to significant risks associated with any single maturity.

In contrast, a portfolio that reflects a single maturity would lack the diversification in cash flows that a laddered approach provides. Concentrating in long-term bonds might expose the investor to more interest rate risk, and increasing default risk would not typically be a characteristic of this strategy. Therefore, the diversified cash flows across time make option C the defining