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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Answer Team Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35498  
Subject: Re: ? bond fund investing in 403 b Date: 4/4/2004 12:46 PM
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"IMHO, If you consider current interest rates and stage of recovery/bond cycle, this would not be good time to lock in duration or credit risk in fixed income or a ladder."

Good point, Orim. Its not a good time to buy a bond ladder either. However, the ladder does give you dollar averaging of interest rates over time and you do get your principle back at maturity. Hence, you avoid the cash losses caused by rising interest rates.

The tough part is funding the whole ladder at one time when rates are extremely low. Better would be to fund the bond ladder gradually by investing in a 5 year bond every year. This spreads the interest rate risk over 5 years. But then, where do you park the funds you are waiting to invest? In money markets? In stocks?

Best is make an overall assessment of the returns and the risks before you decide the right combination for you.
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