jterenzio

Is there a good link to learn more about that?

Thanks for the comment. I was trying to make clear this is a short-term strategy in a rising rate environment where you eventually want the principal back and don't want to take much risk. In accounts with longer term goals like retirement accounts you'd probably mix equities and more diversified bond funds.

Is there a way you think the strategy and when it's appropriate could be made more clear?

I added a note in my article to clarify this. My strategy here is short-term. You want to withdraw your capital eventually, not hold forever. Maybe you are saving for a house in a few years. If you suspect that rates are still rising when you let your ladder burn down then this can be a good approach. I agree that for long term investments (ex. a retirement account) this is probably not the right approach. Thoughts on how I can make it more clear?

Cool. I will read that. I'm trying to address the practical case of buying something, earning interest, then selling it and/or having it mature, not holding into perpetuity. Maybe I can be more clear about this in the post so after I read this I can make an update. Thanks for linking!

I added: Some readers have pointed out that over the long term there isn't a difference between building a ladder and using a similar bond fund. This strategy assumes that eventually you'll want to move your principle out of bonds and into something else like a down payment (while rates are still rising), but you don't have a well-defined timeline. If you are planning on keeping your principle invested in bonds into perpetuity then a bond fund might be a more suitable investment.

Thoughts?

Automated CD ladders are great too. The only issues are if you need to liquidate in an emergency you take a bigger hit, and you owe state tax but in general they can be good enough for many people.

> The mindset for rational and sane upward mobility seems to remain stubbornly out of reach, causing many honest, decent people to save up nest eggs which are then extremely vulnerable to scammers. If we had a body of information available that's better than the current personal finance advice, which seems geared for retirement planning, then we could cut down on a lot of tragic outcomes.

For me, writing this post, I was hoping to make some information available to all that could promote a narrow part of investing that is safe and helps people get the most out of their shorter-term savings. But there is a much bigger picture. Personal finance basics (ex. how to save, how to spend, investing, debt, credit, buy vs. borrow, day-to-day stuff) are sorely lacking in our society and it leaves people vulnerable. It's a huge issue that is going to take a lot to address... This is just a tiny part but I hope to do more.

Please feel free to email me if you ever want to discuss more topics like this.

> Some firms offer target maturity bond funds which will is the best of both worlds.

These are great for corporate bonds. Check out iShares iBonds if you want to include corporate bonds in your portfolio without building a ladder or taking on interest rate risk.

In theory that's true if you hold the fund forever but take the example of VGSH from another comment thread. If you bought that fund exactly 1 year ago and sold today you would have realized a return of less than 2% because while the yield is currently about 2.5% the price decrease over that time was about 1.5%. Your return would have been less than buying a single treasury yielding 2% a year ago and letting it mature.

I am not sure if that's true for non-fixed-maturity funds because the fund manager will keep the ladder rolling after 5-7 years, ie. the fund won't just pay out at maturity - they will keep reinvesting further and further into the future.

There are some bond funds called fixed-maturity funds that actually mature on a date and pay back the principal. Ie. they let all the bonds inside mature without reinvesting them. iShares iBonds are an example. But this is not the norm for bond funds.

Definitely a good alternative if your broker charges fees. As mentioned Fidelity does not but I suspect that's not the norm...

Yes, but the yield on the payouts is only around 2.5% with this fund so the price change has a massive effect on your overall return.

I mentioned it my post that and it's something to consider. With treasuries the spread is fairly tight.

I'm not sure that works universally. If you buy a bond with a 2% yield today that matures in 3 years and you decide to sell in 1 year instead and at that point the current rate is 3% the price you sell at will be lower than the price you paid so you won't make a 2% return in the first year...

Re: fees depends on your platform. Fidelity charges no fees or markups for treasuries but if your platform does it's something to consider in addition to bid/ask spread.

It depends. In my article I pointed out that with Fidelity there are no commissions or markups on treasuries on the secondary market. If there were, it would definitely change the calculus.

You are correct in rising interest rate environments where you believe the rates will continue to rise.

With bond funds you can get the same yield as the ladder (interest payments) if you hold forever and never sell, but if you sell you may take a hit because the price has gone down. That doesn't happen with ladders since you always get paid out the face value.

What holding does is lock your returns and sets a floor. When you buy a bond and hold it you will be guaranteed to receive the return. Sure if rates rise afterwards you have opportunity cost because you can't invest that money at a higher rate, but that's what ladders help you do. You get the current rate when you add new bonds to the end. What alternatives exist? You can buy a bond fund which might decline in value if rates rise or just sit on cash but those don't seem optimal.

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.

Thanks for the comment. I chose that picture more to capture the spirit of collaboration than to highlight specific code. We still have a lot of legacy code that we're constantly trying to improve.

"ctrl-[prefix] z" toggles zooming in on a pane now, this is awesome!!!

Changelog: http://sourceforge.net/p/tmux/tmux-code/ci/master/tree/CHANG...

I did a similar exercise recently to determine the bit rate since they keep it a secret. 192kbps is too low for me so I switched to Mog. http://terenz.io/blog/20120523/rdio-bitrate-uncovered

I recently switched from Ubuntu to Arch for my web server and could not be happier. I prefer the bleeding edge packages and the simplicity. I also learned a ton by having to dive into my config files and launch scripts in more detail. I can imagine for a desktop though it could get overwhelming.

Doesn't really seem in the spirit of things today, does it?

> At some point, you just have to shut up and make stuff.

Amen.

The Economist had great piece about the misplaced fears of wireless a few weeks ago. Worth a read. http://www.economist.com/node/21527022

I created a plugin for this type of thing a while back too:

http://plugins.jquery.com/project/available