The impact of duration on investors is mainly manifested in two aspects. First of all, the longer the duration, the greater the impact of interest rate changes on bond prices. In other words, if investors hold long-term bonds, the impact of interest rate changes on bond prices will be more obvious. Secondly, long-term bonds need to be held by investors for a long time, so they need to take longer risks. Therefore, investors need to choose their own bonds according to their risk tolerance and investment strategies.
If investors want to mitigate long-term risks, there are two ways. The first method is to choose short-term bonds, which can reduce the sensitivity to interest rate changes. The second method is to shorten the duration of bonds by arbitrage. For example, investors can buy bonds and sell interest rate futures contracts, which can effectively shorten the duration of bonds and reduce the impact of market fluctuations. Of course, this arbitrage strategy requires investors to have certain financial knowledge and skills, which is not suitable for novice investment.