Author Topic: bond tent vs. bond ladder  (Read 719 times)

evme

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bond tent vs. bond ladder
« on: May 20, 2018, 11:24:45 PM »
Does anyone know the pros and cons of using a bond tent vs. a bond ladder? My financial adviser recommends a 15-year bond ladder with US treasury strips, but I'm wondering if a bond tent may be a better fit for my needs. I am FI but not yet retired. I plan to continue working for another 3-5 years.

Classical_Liberal

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Re: bond tent vs. bond ladder
« Reply #1 on: May 21, 2018, 04:00:21 AM »
I had to look up the term bond tent, never heard it before.

This is a reverse glide path approach and theoretically it makes sense to reduce retirement date and sequence of returns risk. There quite a but of literature out there.  I would assume the difference being having to hold individual bonds to maturity (I'm assuming this is what your advisor means by a ladder).  This would lose the benefit of cheap/easy rebalancing, which is easily done with a bond fund.

Radagast

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Re: bond tent vs. bond ladder
« Reply #2 on: May 21, 2018, 11:34:16 PM »
They aren't mutually exclusive. We don't know the details of your situation. My view is that a bond tent is a non-rolling bond ladder. Just start buying 5-year STRIPS or CDs, and once you retire in 5 years stop buying them and let them mature. Tadah! Bond tent. You should probably also have a small amount in intermediate or total bond fund that carries through.