Maturity

Maturity is the date a bond or loan must be repaid in full.

Common confusion

Longer maturity usually means more rate sensitivity and often a higher yield.

Why it matters

It sets the horizon of your fixed-income exposure.

A real-world scenario

A college savings plan holds a 20-year bond for money needed in three years for tuition. Rates spike, the bond falls 18%, and the plan must sell at the loss to pay the bill. A three-year bond would have barely moved. The maturity was the mistake: the investment horizon and the bond’s maturity were completely mismatched. This is the single most common fixed-income error, and it is entirely avoidable by matching the calendar.

Worked example

How investors use it

Buy bonds whose maturity matches when you need the money. If you hold to maturity, interim price swings do not matter; if you might sell early, a shorter maturity keeps the swings small.

Key takeaway

Maturity is the date the bond repays its face value, and matching it to your spending horizon is the core rule of fixed income. A long maturity swings far more with rates, so a 20-year bond for money needed in three years is a mismatch that can force a loss. If you hold to maturity, interim price swings do not matter; if you might sell early, shorter maturity keeps the swings small. Laddering maturities gives you both income and flexibility. The calendar, not the yield, should decide how long a bond you buy.

Definitions reviewed by the Investing Glossary editorial team.