Duration: The measure of time in bonds
Duration measures the average time to recover your bond investment, weighted by cash flows.
Unlike maturity (when you recover principal), duration considers periodic coupons you receive.
Duration is crucial because it measures interest rate sensitivity.
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Frequently asked questions
Should I seek high or low duration bonds?
Depends: if you think rates will fall, buy high duration.
Is duration the same as maturity?
No. Maturity is when you recover money.