Using Bond Ladders

 A good strategy for fixed income investors is a laddered bond portfolio particularly to address both inflation and deflation concerns.

 Simply put a bond laddered strategy is purchasing bonds at different interest payment schedules and maturity.

Intermediate and long term bonds perform well in a slow growth deflation economy. In the case of inflation pressures short term bonds will roll off to enable investing at higher rates.

 Keep in mind that bonds have an inverse relationship to interest rates. As interest rates climb the value of the bonds decreases as investors are searching for higher yields and the opposite is true when interest rates are declining.

 To sum up the bond ladder strategy:

•  Laddered bonds addresses inflation and deflation
•  Advantages include interest payment schedules and tax efficiency
•  Intermediate to long term bonds perform well in a slow growth and mild economy

 Daniel Iuculano, AAMS CMFC

Accredited Asset Management Specialist

Chartered Mutual Fund Counselor