Maturity mix refers to the distribution of investments in a portfolio based on their respective maturity dates or terms. It is a strategy used by investors or fund managers to balance risk and return based on the time horizon of their investment goals.
In a maturity mix, investments are categorized into different maturity periods, usually short-term, intermediate-term, and long-term. These categories are defined by the length of time until the investments mature or need to be liquidated.
The purpose of having a maturity mix is to mitigate risk and diversify the portfolio by spreading investments across different time frames. By doing so, investors aim to reduce the impact of potential market fluctuations or interest rate changes that might affect certain investments more than others.
Short-term investments typically have maturities of less than a year and are considered lower risk. They often consist of cash equivalents or fixed-income securities like Treasury bills or money market funds.
Intermediate-term investments typically have maturities ranging from one to ten years. They usually include bonds, corporate notes, or certificates of deposit.
Long-term investments have maturities of more than ten years and are generally considered higher risk. These may include stocks, real estate, or long-term government bonds.
Through a well-balanced maturity mix, investors can optimize their portfolio's potential returns while also managing the level of risk they are comfortable with, according to their investment objectives and time horizon.
