Barbell Strategy

In finance, a Barbell strategy is formed when a Trader invests in Long and Short duration bonds but does not invest in the intermediate duration bonds.

The Short Duration Bond Portfolio strategy invests in high-quality short- and ultra short-term bond funds, floating rate high-income funds, intermediate bond funds, intermediate government income bond funds, and mortgage-backed securities funds.

Bond volatility and risk is managed by using fundamental, technical, and cyclical analysis. Careful monitoring of the money supply and the direction of interest rates is essential for reading developing economic trends and how that might influence bonds. Relative strength comparisons between high-grade bond funds and high-yield bond funds are helpful in identifying dominant trends. Oscillators are especially useful in identifying cyclical influences.

This strategy is ideal for defensive investors focused on capital preservation during difficult economic times. This strategy provides lower volatility risk relative to the U.S. stock market. Consequently, in a weak economic environment, high-grade bonds will rally in value.


The opposite is Bullet strategy.