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Author: dornbush Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19219  
Subject: Five Years' Income Date: 7/24/2000 9:47 PM
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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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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4592 of 19219
Subject: Re: Five Years' Income Date: 7/25/2000 7:15 AM
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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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