This Element is an excerpt from Higher Returns from Safe Investments: Using Bonds, Stocks, and Options to Generate Lifetime Income (9780137003358)by Marvin Appel. Available in print and digital formats.
Using “ladders” to manage the tradeoffs between short- and long-term bond investing.
The bond investor faces a conundrum. On one hand, interest rates are historically low, even though there is a glut of government bonds for sale and inflation looms as a threat. These considerations argue for short-term bonds. On the other hand, you can get higher rates with long-term bonds--especially in the municipal bond market. If you’re undecided, bond laddering may help....