Understanding Duration in Bonds — More Than Just Maturity

When bond prices move, it's often due to something called Duration — not just time, but sensitivity to interest rates. 🧠 🔹 Macaulay Duration: Measures how long it takes to recover your investment 🔹 Modified Duration: Shows how much a bond’s price will change with a 1% interest rate shift 📉 Higher duration = more sensitivity 📈 Lower duration = more stability 💡 If rates are expected to fall, long-duration bonds win. If rates may rise, stick to shorter duration for safety.