[3] The barbell strategy[4] allows for a quick turnover of a significant amount of the assets in the portfolio at one time.
[5] Under simplistic assumptions about forward rates, a bar-bell portfolio comprising only the shortest dated bond and the longest on offer has been shown to maximize modified excess return.
[6] One variation of the barbell strategy involves investing 90% of one's assets in extremely safe instruments, such as treasury bills, with the remaining 10% being used to make diversified, speculative bets that have massive payoff potential.
In other words, the strategy caps the maximum loss at 10%, while still providing exposure to huge upside.
), and a high interest rate helps finance the trader's bankroll for when the market doesn't crash, which is most of the time.