Immunization Strategy in Fixed Income Management

John is a fixed income portfolio manager at a large investment firm. He has several liabilities due in the next 10 years, totaling $5 million. To manage these liabilities effectively, John is considering an immunization strategy that will protect his portfolio against interest rate fluctuations while ensuring he meets his future payout obligations.

John has two options for constructing his immunized portfolio: he can either match the duration of his fixed income assets to the duration of his liabilities or invest in a combination of long-term bonds and cash equivalents. He seeks to understand which approach will be more effective in achieving his immunization goals.