This week, school’s in session on investing in bonds.

Bonds will likely be a critical component of your investment portfolio in retirement, so this week I’m sharing with you what I’ve learned from working with clients over the last 11 years, and trading upwards of $100 million dollars worth of bonds over that time.

Today, I’m sharing with you my favorite way to invest in bonds - the bond ladder.

In order to explain how this 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 weightings that mature this year, next year, 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.

I would encourage you to google the term “bond ladder” or ask your financial advisor about it, because it’s a strategy we’ve used successfully with our clients for decades.

That’s it for today. Thanks for listening.

Tomorrow we’re going to talk about an important debate in the bond world: Bond funds vs. individual bonds.

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

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