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In the article on Bond Ladder, David Braze noted that he keeps 5 years of income needed in bonds or cash rather than in the stock market, and plans to buy new bonds every year with a five year maturity, to reduce the impact of a bear market. I don't understand how this strategy helps, as you need to take money out of the stock market each year to fund the next bond. If you have to take it out every year, you have to take it out EVERY YEAR, so where is the insulation from the bear market?

Thanks,
Bill
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Greetings, Bill, and welcome. You asked:

<<In the article on Bond Ladder, David Braze noted that he keeps 5 years of income needed in bonds or cash rather than in the stock market, and plans to buy new bonds every year with a five year maturity, to reduce the impact of a bear market. I don't understand how this strategy helps, as you need to take money out of the stock market each year to fund the next bond. If you have to take it out every year, you have to take it out EVERY YEAR, so where is the insulation from the bear market?>>

I probably should have inserted a short sentence of explanation to avoid the confusion. Still, the answer should be somewhat obvious. When stocks are down, the current year's needed income is taken from the bond ladder, not stocks. The bond ladder gets replenished when stocks have recovered.

Regards..Pixy
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