How to incorporate bond ladders in your portfolio

A bond ladder is when you have a small number of bonds with successive maturity dates.

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From the Summer 2013 issue of the magazine.

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Q: Several recent issues of MoneySense refer to bond ladders. Does the TD Canadian Bond Index e-Series use this laddering strategy?

—Rick Shantz, Cambridge, Ont.

A: No. The TD e-Series fund you mentioned does not use a bond laddering strategy. Instead it replicates the performance of the DEX Universe Bond Index, says Scott Sullivan of TD Asset Management. A bond ladder is when you have a small number of bonds with successive maturity dates, usually ranging from one to five years. When one bond matures the proceeds are used to purchase a new five-year bond, mitigating interest rate risk. While the TD fund doesn’t work this way there are a number of ETFs on the market that do. For example, iShares has four different laddered bond products and Invesco’s PowerShares has one too.

Bruce Sellery is a frequent guest on financial television shows and author of Moolala. Do you have your own personal question? Write to Bruce at ask@moneysense.ca.

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2 comments on “How to incorporate bond ladders in your portfolio

  1. I like to use a bond staggering strategy not bond ladders.Using longer maturities today like provincial strip bonds in TFSA's,RRSP's can get you anywhere between 3.00% for a 7.5 year to 4.35% for 20-21 year.In this rising bond yield environment having GIC's from 1-5 years pay higher rates than government bonds.Also have at least 1 year of living expenses liquid at all times.

    A $500,000 portfolio can have $25,000 for each year from 1 to 20 years staggered over this period.This way there is protection against higher and lower GIC rates,government bond yields.

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  2. I'm trying to get to a conclusion after reading this article about How to incorporate bond ladders in your portfolio, but I can't..

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