Bachelor's thesis (Turku University of Applied Sciences) Degree Program in Business Management

part of the investment portfolio would face the end of its maturity period on an 
annual basis.
While the described approach ensures better risk management opportunities for 
a particular financial instrument, it additionally guarantees stability of incoming 
cash flows and maintenance of overall liquidity level. Main idea behind current 
method is to allow achieving average levels of income without sacrificing the 
fragile balance of liquidity at the same time. 
In order to have a deeper insight into the nature of the “ladder” investment 
strategy, let us try to describe it in a graphical way. 
Percent 
value 
from the 
overall 
investme
nt 
portfolio
Specifically 
chosen 
time-frame 
(amount of 
years)
20% of 
investment 
portfolio
20% of 
investment 
portfolio
20% of 
investment 
portfolio
20% of 
investment 
portfolio
20% of 
investment 
portfolio
1
2
3
4
5
100%
Figure 4 Graphical representation of "ladder" investment strategy 

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51 
TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Artem Vorobyev 
Short-term oriented investment planning is a fine example of another popular 
method of portfolio organization. While the core of the concept is centred on 
acquiring mostly short-term securities and, therefore, investment operations 
with shorter maturity periods, this strategy is especially useful for liquidity 
maintenance, as it regards the investment portfolio as a primary source of 
liquidity and not profits (University of Kentucky research, p. 2). 
Short-term oriented investment policy could be graphically summarized in the 
following simple way: 
Percent 
value 
from the 
overall 
investme
nt 
portfolio
Specifically 
chosen 
time-frame 
(amount of 
years)
Short-term investments take-up
100% of the portfolio
1
2
3
4
5
Figure 5 Graphical representation of short-term oriented investment strategy 
Banks that would like to view their investment portfolios as a primary source of 
income usually adhere to the policy of long-term investments. Such banks often 
base their investment operations on the decision to acquire financial 
instruments with an average maturity range of several years (Lavrushina 2007, 
p. 363).
With this strategy, it is crucial to pay attention to the fact that these banks are 
considerably more exposed to the liquidity risk and have to rely more on credit 
capital of other financial intermediaries in order to manage short-term expenses. 
Once again, let us use the graphical way of representation in order to introduce 
these ideas. 

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52 
TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Artem Vorobyev 
Percent 
value 
from the 
overall 
investme
nt 
portfolio
Specifically 
chosen 
time-frame 
(amount of 
years)
1
2
3
4
5
100%
6
7
8
Figure 6 Graphical representation of long-term oriented investment strategy 
A thoughtful combination of short-and long-term approaches to the structure of 
investment portfolio introduces us to the "Barbell" investment strategy.
As the name suggests, this method consists in combination of securities with 
various maturity dates. Basically, it means that the bank invests the majority of 
the capital in short-and long-term financial instruments and only a small part of 
investment portfolio is devoted to medium-term securities (Cohen, 2005).
Thus, investments concentrate on the two ends of a time spectrum that helps to 
effectively manage the balance between higher risk, profitability and liquidity: 
while long-term securities provide higher income, short-term investments 
address the liquidity concerns of the bank (Cohen, 2005). 

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53 
TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Artem Vorobyev 
Percent 
value 
from the 
overall 
investme
nt 
portfolio
Specifically 
chosen 
time-frame 
(amount of 
years)
Short-term securities form a half 
or a considerable part of an 
investment portfolio
1
2
3
4
5
100%
6
7
Long-term securities form a half 
or a considerable part of an 
investment portfolio
Figure 7 Graphical representation of the "Barbell" investment strategy 
6.5.2 Active strategies 
Active strategies are more common for large financial intermediaries that pay 
significantly more attention to their investment portfolios and aim to get highest 
amounts of profit from their investments.
In addition to this, current method requires larger initial capital investments, as 
its successful implementation often relies on expert estimations and 
professional forecasts of the stability of various financial market variables on the 
one hand, and potential trends in economic development on the other. 
Approach of percentage expectations or, as it is commonly known, the