Higher Returns from Safe Investments: Using Bonds, Stocks, and Options to Generate Lifetime Income

Chapter 4. Bond Ladders—Higher Interest Income with Less Risk

The bond investor faces a conundrum. On the one hand, interest rates are at historically low levels even though there is a glut of government bonds for sale and inflation looms as a threat. These considerations would argue in favor of investing in short-term bonds. On the other hand, you can get higher rates of interest if you buy long-term bonds. This is especially true for the municipal bond investor. If your tastes run toward Treasury bonds (because you cannot tolerate any credit risk), the spreads between short- and long-term bonds are also very wide.

If you are undecided about whether to assume the risks of long-term bonds to garner their higher interest payments or whether to ...