For years, investors who wanted the benefits of bond laddering had to build them manually—bond by bond, rung by rung.
Today, there’s a simpler, more efficient way: you can invest in a complete bond ladder via a single trade using LifeX bond ladder ETFs. Here's how the world of bond laddering has evolved and why it matters for investors and financial advisors alike.
Why Investors Use Bond Ladders
Bond ladders can be an attractive income strategy because they offer:
- Predictable cash flow from maturing bonds.
- Insulation from market risk as bonds can be held to maturity instead of sold at unpredictable prices.
- Capital preservation when holding individual bonds to maturity, as long as the issuer doesn’t default.
For retirees seeking dependable income or advisors managing portfolios for stability, ladders were — and still are — a key strategy. To learn more, see our article Bond Laddering Explained.
The Traditional Way: Building Bond Ladders One Bond at a Time
Historically, creating a bond ladder required buying individual bonds with staggered maturities. For example, an investor might purchase ten separate bonds, one maturing each year for the next ten years, to create annual cash flow as the bonds mature. While effective, this approach came with serious challenges:
- Time-consuming and complex: You needed to research, select, and purchase each bond individually.
- Higher costs: Bid-ask spreads, brokerage fees, and minimum purchase sizes (often $1,000 or $5,000 per bond) could add up fast.
- Lumpy, intermittent income: Designing a ladder to produce smooth, predictable monthly income is extremely difficult for individuals without institutional tools.
The Evolution: The Bond Ladder ETF
Today, there's a better way. LifeX’s bond ladder ETFs are designed to deliver the benefits of a traditional bond ladder without the manual labor.
- Single trade simplicity: Buy a complete bond ladder with one ETF ticker.
- Level monthly income: LifeX ETFs are designed specifically to provide smooth, predictable cash flow—purpose-built for retirement income needs.
- Low costs: Institutional pricing power and streamlined trading can reduce costs compared to buying bonds individually.
You could invest in the S&P 500 by buying each individual stock yourself, but you probably use an index fund for efficiency and institutional-grade management.1 Similarly, instead of spending hours building and maintaining a bond ladder, investors and advisors can now instantly access a professionally constructed ladder.
For example, purchasing 100 shares of LDDR is designed to generate $1,000 cash flow per month for the next 10 years. Click here to learn more about LDDR.
Who Should Consider a Bond Ladder Strategy?
If you're an individual investor planning for retirement income, a bond ladder ETF provides an easy-to-manage foundation for your portfolio. To learn more about why a bond ladder is a great retirement income solution, check out The Bond Ladder: A Simple Solution for Spending Money in Retirement.
If you're a financial advisor, using a bond ladder ETF can simplify your practice, saving time on manual ladder construction while still delivering the dependable cash flow your clients expect. With the one-click implementation of an ETF, it’s easier than ever for an advisor to design retirement income strategies for clients, including using tactics like deferring social security.
In both cases, it's about spending less time managing complexity, so you can spend more time in ways you’ll truly enjoy.
- The S&P 500 is an index including 500 large U.S. companies and is widely regarded as the best single gauge of large-cap U.S. equities.
