What does Portfolio Immunization aim to accomplish?

Portfolio immunization is a strategy designed primarily to protect a portfolio against fluctuations in interest rates. This approach helps ensure that a portfolio can meet its future liabilities by matching the duration of assets and liabilities. When interest rates change, the value of bond investments can vary significantly, but with immunization, the portfolio is structured in such a way that it minimizes the impact of interest rate movements, providing a stable return to meet future cash flow requirements.

In contrast, maximizing investment income through aggressive trading does not align with the principles of immunization, which prioritizes stability over high-risk returns. Similarly, focusing solely on equity investments or investing in speculative opportunities would not achieve the goal of protecting against interest rate changes, as these strategies expose the portfolio to higher volatility and potential losses due to market movements. Therefore, the objective of portfolio immunization is clearly to safeguard assets from the impact of interest rate fluctuations, making it the most appropriate choice.