What is a Barbell Strategy?
A barbell strategy is one of several different types of portfolio strategies that is designed to create a reasonable return on the investments that are part of the asset portfolio. Essentially, the barbell strategy is built around the concept of focusing on the maturities of the securities that are part of the portfolio and making sure that the maturity dates are either very close or at a distant date. Here is how the barbell strategy works, and what types of results are desired as a result of utilizing barbell strategies. The key to employing a barbell strategy is seeking to include bonds and other securities that are set to mature either in the short term or the long term. While it is always a good idea to include a mix of investments with a variety of maturation dates, the difference in this approach is to concentrate those dates at opposite ends of the spectrum. This means that two blocs or groups are created within the portfolio, rather than having securities that mature consisten
The picture above (which I find comedic and enjoyable to watch), illustrates the barbell concept: essentially, a barbell strategy is an asymmetric diversification scheme – it’s a hedged portfolio. The bells receive most of the weight, while the bar contributes a small fraction to the whole (note: as we shall see, we leverage the bar, as demonstrated above).
