Climbing a Bond Ladder

Physician's Money DigestFebruary28 2005
Volume 12
Issue 4


Interest rates are on the way up,thanks to Alan Greenspan and Company.How to cope? Try bond laddering.Buy bonds that mature at differentintervals, usually in yearly incrementsfrom 1 to 5 years. As the 1-year bondsmature, roll the money over into higher-yielding 5-year bonds, which willearn more as rates go up. Eventuallyyou'll have a portfolio of 5-year bondsproviding you with an income stream,with a portion of the bonds maturingevery year. The cheapest way to build aUS Treasury-bond ladder is to use thegovernment's TreasuryDirect Web site( Theladder strategy is not appropriate forinvestors who may need to cash out aportion of their bond holdings beforethey mature.

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