David Blair of QuadCap Wealth Management outlines the features of laddering bonds.
Dallas, TX (1888PressRelease) May 22, 2011 - Bond Ladders, a powerful tool for retirement. A bond ladder works by spreading investment dollars among bonds that will mature at various times between one and fifteen years from now. In a normal interest rate environment, shorter maturities will yield less than longer maturities. Think of the individual bonds as rungs on your ladder. As each individual bond matures, your principal is made available for reinvestment at current interest rates.
The value of a ladder is the ability to reinvest the principal from the maturing bond into a new bond with a higher yield. The new bond will then become a new rung of your ladder.
Another advantage of using the ladder strategy is that you can customize your ladder to suit your individual investment objectives, such as meeting future funding needs or fulfilling specific income requirements. Investment selection will also take into account such things as your tax liabilities, quality considerations and anticipated future changes in your financial situation.
Ladders are typically built using a variety of the following types of fixed income securities: U.S. Treasury and government agency securities, tax-exempt municipal bonds, corporate bonds, zero-coupon bonds.
Why Use a Ladder?
It's a Strategy for All Interest Rate Environments. Since a bond ladder enables you to reinvest your assets periodically over time, your portfolio will be less affected by interest rate volatility. This concept is similar to dollar cost averaging in stocks. As bonds come due, you are able to reinvest your principal into bonds of intermediate or longer term maturities, where the yields are higher.
Interest rate changes will affect you less with a bond ladder. Here's why:
• If interest rates go down over the next few years, you will already have locked in higher rates--and the current market value of your fixed income portfolio will be rising.
• If interest rates stay the same, you will be earning longer term yields, so your return should exceed what you would be earning if you left your investment short term.
• If interest rates go up, the current market value of your fixed income portfolio will be falling. However, as each rung on the ladder matures, you will have money to invest at higher rates.
We started QuadCap Wealth Management, LLC to focus on a highly personalized comprehensive counseling program that is driven by dedicated personal service. Our firm provides in depth comprehensive financial counseling that covers all areas of your financial affairs, such as employee benefits planning, tax planning and preparation, asset allocation strategies, estate planning and wealth transfer strategies, as well as risk mitigation strategies.
David Blair of QuadCap Wealth Management outlines the features of laddering bonds. 
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