This week, I’m talking about 5 types of bonds to own now. 

Today, I’m talking about building a bond ladder, which is my favorite way to own bonds. It works when rates are going up, down, and sideways, and it helps keep your income from bonds more predictable. Here’s how it works:  I want you to picture a ladder. Each step or rung on the ladder represents one year. The ladder might have 5 rungs or 10 rungs, or somewhere in between. 

So if I build a 5 year bond ladder for a client, I buy bonds of ideally equal dollar amounts that mature next year, the year after that, and so on for 5 years. 

Here’s why I love bond ladders...Bond ladders provide predictable income, because one year of bonds will mature each year, but the other 4 bonds stay invested, so the income tends to be very stable. Bond ladders are generally more liquid too because of their shorter-term nature, and they work great in a rising interest rate environment, because you get to gradually re-invest your bonds at higher rates each year as your bonds mature and cash out, rather than being locked-in for years to come. 

It’s a strategy we’ve used successfully with our clients for decades. I like buying corporate bonds because the yields are higher. You can do this through buying individual corporate bonds or by buying bond ETFs with specific year maturities. I prefer the ETFs because the yields are about the same as individual corporate bonds, but it’s much more diversified. 

That’s it for today. But before you go, you probably know someone who is close to retirement and could benefit from listening to this podcast. If so, please share this podcast with them - just send them a quick text with a screenshot or a link and encourage them to check it out by adding it to their flash briefing in Alexa or subscribing wherever they listen to podcasts! 

Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip.

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