Definition
The term bullet strategy refers to an investment approach involving the purchase of fixed income securities that mature in the same timeframe. The bullet strategy is oftentimes used by investors that need funds on a certain date.
Explanation
The bullet strategy involves the purchase of fixed income securities with similar maturity dates. The term bullet is derived from the relatively narrow focus of the investment portfolio. The approach is frequently used when the investor needs the funds in a certain timeframe. For example, the bonds may be used to pay for a wedding, fund a college education, or pay off a mortgage.
When executing the bullet strategy, the investor will purchase assets over an extended period of time. This allows the investor to take advantage of any opportunities the market presents, as well as diversify their bond portfolio. Since interest rates may fall as assets are accumulated over time, the investor must closely monitor the market.
Related Terms
The term harvest strategy refers to the planned discontinuation of new investments in a line of business or product so the maximum profits can be extracted from it. Harvest strategies are oftentimes used when a product is nearing the end of its lifecycle, or the usefulness of a service is nearly over.
Moneyzine EditorJanuary 19th, 2024
The term Halloween strategy refers to the selling of stock before May and not investing in equities again until the end of October. The Halloween strategy is based on a theory that the months of November through April provide investors with stronger capital gains than the remainder of the year.Moneyzine EditorNovember 6th, 2024
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The term event-driven strategy refers to an investment approach that attempts to exploit pricing inefficiencies that occur after significant corporate announcements. Event-driven strategies are used by large institutional investors when a company notifies the public of plans that will impact their future earnings potential.Moneyzine EditorJanuary 17th, 2024
The term bond ladder refers to an investment strategy involving the purchase of fixed income securities with staggered maturity dates. The bond ladder strategy helps investors to manage interest rate risk and provides them with the opportunity to make a series of reinvestment decisions over time.Moneyzine EditorNovember 6th, 2024
The term barbell strategy refers to an investment approach involving the purchase of fixed income securities with both long and short term maturities. The barbell strategy typically applies to bonds, and is thought to provide the investor with a portfolio that balances risk and reward.Moneyzine EditorJanuary 8th, 2024
