Bond Ladder

A Time-Tested Investment Strategy Geared For Increased Predictability, Control and Performance.

 

 

How A Bond Ladder Works

 

A bond ladder is a strategy for managing fixed-income investments, such as certificate of deposits (CDs, U.S. Treasury notes and bonds, municipal bonds, corporate bonds and zero coupon bonds.

 

To build a ladder, simply divide your investable dollars evenly among bonds or CDs that mature at regular intervals, for example, every six months or once a year.

In the example below, we divide $50,000 into five $10,000 investments with the first bond maturing in one year and the fifth in five years.

When the first bond matures, the principal is reinvested in another bond at the long end of the ladder. This process is continued year after year, as long as the investor’s goals remain the same.

 

As you can see, the fundamental idea behind a bond ladder is diversification by maturity. Diversification is one of the cornerstones of sound investment management.

 

The bond ladder strategy offers you many benefits:

 

Higher Average Yields

Generally, the longer a bond’s maturity, the higher the yield. A bond ladder combines the higher yields of longer-term bonds with the liquidity of shorter-term bonds.

 

More Consistent Returns

If interest rates rise, newly purchased bonds take advantage of improved rates. If interest rates fall, your prior laddered holdings will most likely produce more income than could be achieved at the current levels. The result may be a more consistent yield.

 

Less Reinvestment Risk

With a bond ladder, you lessen reinvestment risk-the risk that all income assets mature when yields are low, forcing you to accept less income or choose riskier, higher-yielding investments. A bond ladder strategy can reduce the impact of this risk. However, this requires an ongoing commitment to the program.

 

Bond Diversification 

In addition to diversifying your principal in bonds with different maturities, you can also build your bond ladder with different issuers and credit ratings. By doing so, you have potential to benefit from the additional diversification.

 

Ongoing Liquidity

With a bond ladder, you have one or more bonds maturing on a regular basis. You can choose to reinvest your principal in another bond or redirect the funds for another purpose. Should you need extra cash, liquidating your shorter maturities should have minimal impact on your portfolio™s overall yield.

 

Risks

Every investment involves a risk/reward trade-off. The less risk you are willing to assume, the lower the yield or return you can typically expect from an investment. Generally speaking, bond investors demand higher yields for shouldering market risk and credit risk.

 

 

Market risk is simply another way of describing the inverse relationship between bond prices and interest rates. If interest rates are rising and you don™t want much fluctuation in your bond portfolio, stay short-term. Although rising interest rates push all bond prices down, in general, the longer a bond™s time to maturity the greater its price sensitivity. By concentrating on short-term bonds, you may be less exposed to market risk “ a comfortable posture for many.

 

 

On the other hand, if interest rates are falling from currently high yields, income-oriented investors may want to purchase longer-term securities. This strategy enables you to own an attractive yield that may not be available in the future. Because interest rates are difficult to predict with accuracy, you may want to own short- or intermediate-term bonds (up to 10 years) and simply hold them to maturity. Bond ladders can be structured with short-, intermediate-, or long-term bonds. The bond ladder concept is a strategy many investors to follow with a goal to minimize market risk. Credit risk is the risk that the issuer won™t make timely interest or principal payments. If you are concerned about default, construct your bond ladder with Treasury securities, high-quality or insured municipal bonds, or corporate bonds. Although you may sacrifice some yield, you’ll have peace of mind knowing you own high-quality securities.

 

 

In general the bond market is volatile, and fixed income securities carry interest rate risk.  (As interest rates rise, bond prices usually fall, and vice versa.  This effect is usually more pronounced for longer-term securities.)  Fixed income securities also carry inflation risk and credit and default risks.  Any fixed income security sold or redeemed prior to maturity may be subject to substantial gain or loss. 

 

 

The bonds are subject to availability. 

 

 

Bonds are subject to interest rate, market, inflation and credit risks.  Bonds that are rated by Moody’s at Ba or below are considered to have speculative elements and the repayment ability of the issuer is not assured.

 

 

Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

 

 

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

SARAH SBRAGIA​

Sarah has been working at Southwest Investment Advisors since October of 2017.

Hers is the first friendly face you will encounter when visiting the office.

Sarah’s responsibilities include assisting clients with online access, processing account documents, scheduling meetings and assisting in all aspects of client services.

When she is not working here you may find Sarah on the shooting range serving as an assistant instructor and safety coach.

She has two children, son Zach is a graduate of the University of Arizona and daughter Paige who will graduate in 2019.

KATAYA PLETT​

Kataya has been with Southwest Investment Advisors since January of 2017.

She assists Alix with portfolio construction, rebalancing, and trading.

Kataya also plans our company’s client appreciation events and assists with the company website.

In her free time Kataya enjoys spending time with her family and her dog, traveling to new places, and getting involved with local events.

LACEY ROGERS​

Lacey has been with Southwest Investment Advisors since 2007 and has been the Operations Manager since 2012.

Her primary duties are assisting clients, assisting Advisors, processing paperwork, and working with our back office at LPL Financial.

When she’s not working she enjoys riding horses and spending time with her husband, Dustin, her two small children, and her dogs, Tebow and Ellie.

Lacey and her family really enjoy traveling, spending time outdoors, and watching her dad, Robert Wright, play the banjo.

ROBERT SCHANNEP​

Robert has been an Advisor since 2012 following in the footsteps of both his father and grandfather. He holds a Bachelor’s Degree in English Literature and graduated Summa cum Laude from BIOLA. After working several years in Social Services Robert has a distinct perspective when helping people create and manage their financial goals.

When Robert is not working, life is all about family. Along with his lovely wife, Robin, four beautiful children and their dog, he enjoys traveling in the family bus, which is always an adventure. He enjoys meditating, praying, journaling and plays the guitar daily to maintain his sanity!

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Licensing and Regulatory​:

Licenses: Series 7, Series 63, Series 31 held through LPL Financial and the Series 66 is held through LPL Financial and Southwest Investment Advisors

ROB WRIGHT​

Rob is an original co-founder, has been in the industry since 1994. He has degrees in English and Liberal Studies as well as a Teaching Certificate from California State San Bernardino.

Before becoming a Financial Advisor, Rob was a member of the New Christy Minstrels and he continues to perform with his banjos and other stringed instruments in concert as a member of the Wildcat Jazz Band throughout North America and as a guest artist with local symphonies and at various music festivals. Rob and his wife, Linda have one daughter and two grandchildren.

Rob has since retired and no longer has duties at Southwest Investment Advisors, Inc.

BART SCHANNEP

Original co-founder, Bart has worked as an Investment Advisor since 1983.  He was with Dean Witter/Morgan Stanley for fifteen years, serving as Branch Manager during the final four years, before moving to Piper Jaffray as Branch Manager for an additional three-and-a-half years before co-founding Southwest Investment Advisors.

In 2008, Bart become one of the first 200 professionals obtaining the industry’s newest designation, the Certified Wealth Strategist® designation, and administered by Cannon Financial Institute.

In May, 2010 Bart was selected for the distinction of Outstanding Advisor of the Year by Registered Rep Magazine, one of 10 financial advisors selected by the editors for 2010. From hundreds of nominees, the winning advisors have demonstrated both business success and leadership in serving as guides to other financial advisors and as active participants in community activities.

He is active in his church and served as President of the Board for Gospel Rescue Mission of Tucson from 2007 – 2010 and 2015 – 2018.  Bart also has served on the Board of Adjustments for the town of Oro Valley from 2002 – 2008.  Bart and his wife Marcella have three grown children and several grandchildren. Together they enjoy wine tasting, scuba diving, and travel.

Bart has since retired and has no responsibilities at Southwest Investment Advisors, Inc.

RICK ZICH

Rick is in charge of the managerial duties at Southwest Investment Advisors.  As a Financial Advisor, he meets with new and existing clients and helps with problem solving.

He has a Bachelors of Science in Business and Marketing from Purdue University and an MBA from the University of Phoenix. His past 20 years of business experience includes roles of Controller, CFO, and President of consumer goods companies with double digit growth for over a decade.  He and his wife own a local jewelry boutique, Trinity Diamonds.

Outside of the office, Rick enjoys keeping up with the latest in tech news, scuba diving, hiking, playing the electric bass guitar (well, trying to), and keeping the dogs happy with long walks.

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ALIX KUSLER

Alix’s primary roles in the team are portfolio management and client contact. She focuses on building and maintaining client relationships and reviewing and constructing portfolios that reflect clients’ individual goals.

Alix holds a BS in Business Administration from Pepperdine University, where she studied both in Malibu, California and Florence, Italy. She started with Southwest Investments in 2009 on the operational side of the business and has built her way to the sales side.

In 2014 Alix obtained one of the industry’s newest designations, the Certified Wealth Strategist® designation, administered by Cannon Financial Institute.

When she’s not in the office, Alix enjoys traveling and exercising with her husband Phil, singing at the Vineyard Christian Community, and meeting up for tea or a cold brew. She has a wonderful family and close group of friends and is excited to be a part of the team here at Southwest Investment Advisors.

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