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Author: jackcrow Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35527  
Subject: Re: STRIPS in an IRA Date: 2/14/2006 10:57 AM
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/hb,

The beast you inherited is the flip side of Zero's. The U.S. Govt sells in bulk to financial institutions a quantity and type of bonds with permission to "strip" the interest and sell that seperately and then sell the appreciating face value of the bond as a Zero.

This makes both dirivitives more volatile then the when they were combined. The other general rule is that the longer the maturity the more volatile. This means, within your portfolio, the 2021 is the most volatile and the 2009 is the least.

In a rising interest rate enviroment, as you pointed out, they all loose value but the 2021 will loose the most and the 2009 the least.


Several questions for you. STRIPs are usually purchased for their income stream. Do you really have to liquidate any of them in order to meet the required withdrawl?

If so then it becomes a question of how much volatility you can tolerate and for how long.

jack
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