Building a Treasury Bond Ladder
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Building a Treasury Bond Ladder
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Re: Building a Treasury Bond Ladder
#2If you're not a HNWI I wouldn't bother buying individual bonds (and if you are, you're probably paying someone to do it for you). You can get 99% of the benefit of this full ladder just using a few etfs. Check out $VGSH, $VGIT, $VGLT - expense ratios are only 0.07. But also if you're young you probably shouldn't worry about this. You don't hold many bonds anyway and you shouldn't be trying to time the market - just buy a total bond fund and forget it.
If however, you do want some pizzazz in your bonds, also check out barbells and bullets. The concept is the same as a ladder except you're not equal-weighted across time. And then check out Vanguard's short, intermediate and long corporate bonds and you can do similar things in the corporate space.
Re: Building a Treasury Bond Ladder
#3YES! This is the kind of content I love to see on HN!
I see no tip jar OP. Let me know how I can buy you a beer.
Re: Building a Treasury Bond Ladder
#4YES! This is the kind of content I love to see on HN! I see no tip jar OP. Let me know how I can buy you a beer.
Second this! I know the community is heavily "tactical tech" only (eg: react, js, go, etc) - but I love me some complex finance discussions. [Note: I agree ladders are not complex, but fun to see anyways]
Re: Building a Treasury Bond Ladder
#5This is something I've always wondered: Are treasury bond ladders strictly better than an equivalent treasury bond fund (say VFITX), because the interest rate risk can cause the bond fund to lose value while the treasury bond ladder is guaranteed to not lose value if held to maturation?
Or is there some finance black magic that causes treasury bond ladders and treasury bond funds with the same effective maturity to have the same return (ignoring expense ratio for now) after a long period of time?
Re: Building a Treasury Bond Ladder
#6If you're not a HNWI I wouldn't bother buying individual bonds (and if you are, you're probably paying someone to do it for you). You can get 99% of the benefit of this full ladder just using a few etfs. Check out $VGSH, $VGIT, $VGLT - expense ratios are only 0.07. But also if you're young you probably shouldn't worry about this. You don't hold many bonds anyway and you shouldn't be trying to time the market - just b…
I agree for long-term investments a fund might be better (ex. in a retirement account mixed with equity funds) but if you bought those bond funds in the past few years and sold them you might not have made much of a return. For example in the past 1 year the price of VGSH went from 60.83 to 59.87 so you lost over 1% on the price change which cancels out most of the interest yield. My point is that for short-term savings in a rising rate environment this can work better.
Re: Building a Treasury Bond Ladder
#7[deleted]
Re: Building a Treasury Bond Ladder
#8This is something I've always wondered: Are treasury bond ladders strictly better than an equivalent treasury bond fund (say VFITX), because the interest rate risk can cause the bond fund to lose value while the treasury bond ladder is guaranteed to not lose value if held to maturation? Or is there some finance black magic that causes treasury bond ladders and treasury bond funds with the same effective maturity to h…
From the article:
> Bond prices fall as interest rates rise. You can avoid this by buying individual bonds and holding them until they mature (pay out their full value).
You can avoid selling the bond at a loss; however, you are still holding a bond that earns less interest than current bonds are earning. As far as I know, holding to maturity doesn't improve your returns in the face of rising interest rates despite what the author seems to be implying.
Re: Building a Treasury Bond Ladder
#9This is something I've always wondered: Are treasury bond ladders strictly better than an equivalent treasury bond fund (say VFITX), because the interest rate risk can cause the bond fund to lose value while the treasury bond ladder is guaranteed to not lose value if held to maturation? Or is there some finance black magic that causes treasury bond ladders and treasury bond funds with the same effective maturity to h…
From the article: > Bond prices fall as interest rates rise. You can avoid this by buying individual bonds and holding them until they mature (pay out their full value). You can avoid selling the bond at a loss; however, you are still holding a bond that earns less interest than current bonds are earning. As far as I know, holding to maturity doesn't improve your returns in the face of rising interest rates despite w…
Don’t forget transaction fees. If you sell bond X that pays out 100$ in 1 year for bond Y which pays out 100$ in one year you gained nothing.
Re: Building a Treasury Bond Ladder
#10If you're not a HNWI I wouldn't bother buying individual bonds (and if you are, you're probably paying someone to do it for you). You can get 99% of the benefit of this full ladder just using a few etfs. Check out $VGSH, $VGIT, $VGLT - expense ratios are only 0.07. But also if you're young you probably shouldn't worry about this. You don't hold many bonds anyway and you shouldn't be trying to time the market - just b…
I agree for long-term investments a fund might be better (ex. in a retirement account mixed with equity funds) but if you bought those bond funds in the past few years and sold them you might not have made much of a return. For example in the past 1 year the price of VGSH went from 60.83 to 59.87 so you lost over 1% on the price change which cancels out most of the interest yield. My point is that for short-term savi…
Isn’t that ignoring dividend payouts? This says it’s like -0.2% over the last 12 months including payouts vs -1.6%. No idea how accurate this is but it’s an important correction to just the price returns if you’re talking about holding the shares.