Devoted to understanding the basics and fundamentals of investing

Most investors are familiar with "Dollar Cost Averaging" where you invest the same amount of money each month in the stock market.  This allows you to buy more stock when the markets are down and less stock when the markets are up. 

There is a similar concept in bonds.  It is called a bond ladder.  Simply a bond ladder is built by purchasing bonds with different maturities spaced in a regular time period.  To illustrate, you could build a one year ladder buy buying 12 CDs (Certificates of Deposit) that each matured in a different month of the year.  At the end of the first month the first CD would mature and you would reinvest the money in a 12 month CD.  You would repeat that exercise each month.

In this example, you would have access to money each month and you would reinvest at the prevailing interest rate of that month.  A ladder helps minimize the risk that you would have to reinvest all your bond money at low interest rates. 

Most ladders are longer than the 12 months I used in the example above.  There is very little reason however to extend the ladder more than three years in my opinion.  Three years will get you beyond all but the most prolonged falls in interest rates and allows you to avoid the price fluctuations in your portfolio that come from longer duration bonds.  You could build the ladder with quarterly, semi-annual or annual rungs of the ladder.

By choosing bonds with different coupon dates you can ensure monthly income if you desire it.  You can also use different kinds of bonds to construct your ladder; CDs, Treasury Bills and Notes, Municipal Bonds, Corporate Bonds, etc.  If you buy CDs from your bank or the Treasury instruments through Treasury Direct you do not usually have brokerage fees for building your ladder.  Other bond instruments would involve the payment of brokerage fees.

If you have made fixed income a part of your portfolio consider building a bond ladder.  Most advisors recommend ladders as a superior way to invest in bonds.