What it is
The bullet strategy is a method for investing in fixed income assets, such as time deposits and bonds. It may help investors manage risk posed by changing interest rates.
To do this, you’ll invest in multiple interest-bearing products with the same maturity but at different times. It’s called a bullet because you aim to hit a specific maturity date.
For example, you invested in 3 different bonds that will mature in 2030. You bought the 1st one in 2025, the 2nd in 2026, and the 3rd in 2027.
What it means for you
You can consider following the bullet strategy if you want to invest in fixed income products for a time-sensitive goal while maintaining some control and flexibility.
Interest-bearing investments like bonds are sensitive to changes in interest rates. When rates go up, the value of older bond issuances goes down since new bonds will offer more attractive rates.
The bullet strategy may allow you to start investing early while still having the chance to take advantage of higher rates in the future.
Keep in mind there’s no guarantee interest rates will go up. It’s possible to end up getting lower rates on your succeeding investments if you’ll follow this method.
This approach can also help you invest within your budget. You can begin investing even if you don’t have a huge lump sum to start with. Instead, you can add to your investments over time.
