Friday File: Cutting Down the Tower, Speculating on Gold
by Travis Johnson, Stock Gumshoe | April 12, 2024 6:05 pm
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Source URL: https://www.stockgumshoe.com/2024/04/friday-file-3/
Thanks for the update, Travis!
Travis, how do you build your 3 month – 2 year bond ladder?
It has really become more of a quarterly to 2-year ladder these days. It’s fairly simple, just requires some activity once a quarter — I started out by buying roughly equal values of three month, six month, nine month, 1-year and 2-year bills and notes, then as each one matures I reinvest that money in a new two-year note. Given that regular savings accounts now have similar yields (they took a while to catch up with T-Bill rates), it would actually also be pretty reasonable to just put all the savings you want to put to work into a savings account and use perhaps 1/8 of those savings each quarter to buy a 2-year note, you’d get a very similar return and it would be simpler.
The same logic is more often applied going out further on the yield curve, so you’ll often see 1-5 or 1-10 year Treasury ladders packaged by brokers, basically just a way to put your money in treasuries without having to pick a maturity along the curve or manage it actively, letting you just keep each bond or note to maturity instead of worrying about the fluctuating values in an ETF or mutual fund portfolio of bonds. As long as the cost is low, those are all likely to be pretty reasonable. Banks sometimes do it with CDs, too. I expect we’ll see more of that as the 10-year approaches 5% again, which will probably lead more folks to want to “lock in” those kinds of returns for a longer period of time.