when interest rates rise the demand for lower interest paying bonds decreases this leaves the bond with less liquidity since bond buyers can find similar maturity bonds with higher interest payments the only way to get a more favorable price in this scenario is to wait for interest rates to go down which causes the bond to go back up in price 
buying a large position in one bond could also leave the investor exposed to credit risk similar to owning only one stock in a portfolio a bond s price is dependent on the credit of the underlying company or institution if anything lowers the credit quality of the bonds the price is negatively impacted immediately for example puerto rico bonds were once very popular but when the province had financial issues the bond prices immediately plummeted using a bond ladder satisfies these issues since there are several bonds with a staggered maturity bonds are constantly maturing and being reinvested in the current interest rate environment if the investor needs liquidity selling the shorter maturity bonds offers the most favorable pricing since there are several different bond issues the credit risk is spread across the portfolio and properly diversified if one of the bonds has a downgrade in credit quality only a portion of the entire ladder is affected generally speaking you should aim to have at least 10 rungs in your bond ladder all things equal the more rungs in the ladder the higher the diversification liquidity and yield stability example of a bond ladderhere s an example of a simple bond ladder that retail investors can create in order to construct a 10 year treasury bond ladder an investor would simply buy the following 10 etfs in equal amounts bond ladder faqsno since callable bonds can be redeemed by the issuer before maturity they re not ideal when building a bond ladder in order to build an etf bond ladder an investor simply needs to put an equal amount of money in a number of different etfs all with a different defined maturity date for example to build a 10 year corporate bond ladder an investor could purchase the following etfs in equal amounts instead of building a bond ladder an investor can purchase an etf that holds a diversified portfolio of bonds of varying durations popular all duration etfs include the ishares core u s aggregate bond etf asg the vanguard total bond market etf bnd the vanguard total international bond etf bndx and the ishares tips bond etf 