Do you see any issues with creating a bond FUND ladder? Does this make sense? Here is what i mean.
Example: say you have $1M to invest, and you want a bond duration of 7 years. Instead of buying one 7 year fund, you buy a 3 year fund, and an 11 year fund (in equal amounts). The average duration = 7 years. The advantage is that if in the future you need some money, you could sell out of the 3-year fund, mitigating any potential losses due to interest rate increases just prior to selling.
The $1M, 4,7, and 11 are all fictitious - but you get the idea.
Thx
Example: say you have $1M to invest, and you want a bond duration of 7 years. Instead of buying one 7 year fund, you buy a 3 year fund, and an 11 year fund (in equal amounts). The average duration = 7 years. The advantage is that if in the future you need some money, you could sell out of the 3-year fund, mitigating any potential losses due to interest rate increases just prior to selling.
The $1M, 4,7, and 11 are all fictitious - but you get the idea.
Thx
Statistics: Posted by LISD — Tue May 28, 2024 4:57 pm — Replies 4 — Views 232