Municipal Bond Forum
‘Long-term ladder’
Q
I completely agree with your advice and value your editorials. The only caveat I would add is that I like to purchase what I call a “long-term bond ladder.” I only buy bonds delivering the most interest (generally 20 to 30 years) but with various maturity/call features. This has served me well as I have been averaging 5% returns over the last 18 years and still get “interest rate protection.”
A
James A. Klotz responds:
We used a 30-year bond in our example but we didn’t mean to imply that our clients should always buy the “longest term” bonds available.
It is clear from your e-mail that you understand the variables associated with the municipal bond yield curve at different times.
You can see by reviewing the recommended offerings on our Web site that we agree about opting for shorter maturity dates given the ability to capture the lion’s share of the income available on 30-year bonds. Your approach is right on the money.
Start here.
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The responses provided in this forum are meant to address specific questions posed by investors about their municipal bonds and to provide market insight for our general audience. Please note, your investments, objectives, results and experience may differ significantly. Our answers and any potential strategies discussed should not be construed as a solicitation to buy nor sell any security or investment product. All investing entails risk.