No. of Recommendations: 1
You seem to be well informed, and may know more about bonds than I do, but let me take a crack at your questions--

1)Given the recent events in current bond market (by that I mean the inverted yield curve), do I
need to worry about my timing and when to get started?

Any time you invest, you are taking a risk on interest rates (except for the I bonds noted in a recent posting). Some investments will be impacted by rising interest rates (or recession) much more than others. The risk is relatively small with good quality fixed income investments that have fixed maturity dates, but its still there. If you feel interest rates will rise, money markets or short term investments can be better--but because there is less risk, they also pay lower interest. Similarly the threat of recession can be dealt with. Stocks will be more affected than bonds. Recession usually means interest rates will fall, so bonds are a great place to be--but not if the company issuing your bonds fails. So you want quality bonds in a recession.

In short, you have to decide for yourself the timing, direction and magnitude of future interest rate changes. You can then design a strategy to optimize returns with those changes.

2)I've read that when interest rates are low and rising a good strategy is to invest in short to medium
term bonds. Is this a sound approach?

At maturity, with bonds, you get your money back. When interest rates rise, the market value of bonds decreases. Longer maturity bonds tend to lose more value. So short term bonds become safer. But this is a concern only if you are forced to sell the bonds before maturity. For the individual investor, the best is buy quality bonds, put them away, collect the interest and wait for the bonds to mature. Don't worry about the intermediate values--unless there is a major change in the credit worthiness of the issuer or you suddenly need the money for some reason.

3)With the amount I am interested in investing in bonds, would my strategy be any different than if I
had less money to invest?

It is difficult to invest in individual bonds with less than about $25K. Even then you have limited liquidity if you need to sell them and you have little potential to ladder them or to diversify. So small investors should look at bond funds (but not when interest rates are rising. At the moment CDs are better for small investors.) Your $300K is large enough to buy a series of bonds over an array of maturities and may be large enough to invest in some lower quality bonds (greater risk, higher yield).

4)To invest in stocks I use a dollar cost averaging scheme, is there a similar strategy used for

You can do dollar cost averaging with bonds if you want to, but most people would be inclined to accomplish similar goals with a laddered maturity bond portfolio. Laddering causes your bond portfolio to generate a moving average of current interest rates. So your income changes with interest rates, but slowly--either way, up or down. Laddering also gives you steady turnover, so your paper losses (or profits) with changing interest rates tend to get averaged out. The downside tends to be limited by the fact that you have bonds maturing at steady intervals.

5)How often do I need to review my bond portfolio?

Every time you buy a new one, it would be a good idea to review all of them--especially for changes in bond ratings (ie credit worthiness). Generally every 6 to 12 months would be enough for those buying investment quality bonds, but large investors probably subscribe to rating services and may even get minute by minute alerts to pending changes in ratings.

6)Is there a particularly good book on the pros and cons of laddering, barbell, bond swapping and
the like?

See the bond education links in message 218 on this board, but also the books discussed in recent postings.

7)As compared to the stock market the bond market seems to be a hidden beast. Are there any
good web sites, or any other sources for that matter, that makes the market a little more

We often hear this comment. The bond market is one of the darker corners of Wall Street. Bond traders like it that way. It probably helps them increase their income. I am not aware of any good sources. But remember we are retail customers. To those who work in the industry, I would bet there are numerous war stories and a wealth of insider knowledge of who the forces really are in the industry.

Welcome to the board. Delighted to have your participation here.
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