Thoughts, learning a lot this year
I'd say you're on the right track. I also feel a little hesitant pulling the "buy" trigger. We sold a 400K multi unit in January and will close on the sale of another of our multi unit apartment buildings THIS coming January so I'm having a ball "laddering". I'm not doing it quite as organized as I'd like, a little piecemeal but we have enough that we'll be ok if my laddering timing is a little amiss. Some thoughts that might add ot your toolbox, and I'd also welcome comments on my strategy.
1. I think with corporates, one solution is to use one of the two "bulletshare" type ETFs available. Diversified collection of IGB's with specific maturity. A lot has been said on this forum about this solution, and one thing that stands out is that they aren't always great to keep through the final year of their term. The last year before maturity they redeem various bonds throughout the year, so they stop earning. Although the ETF for 2028 for example might have a yield to worst of 6.2%, you'll get way less the final year, so might be a good strategy to add a year to these. i.e. if you're laddering for 2028, you might use the bulletshare ETF maturing in 2029 to satisfy 2028's "rung".
2. REINVESTMENT RISK! Interest rates are great right now, especially short term, but as you receive the interest...where will it go if you don't need it? What if rates go back down to 2-3%. How that 200K or so in 7 year TBONDS isn't such a great deal. So this will hinge on whether or not you need the interest along the way. Solution 1: Buy TIPs that have a super LOW coupon rate so that the appreciation you get is all inflation and appreciation. For example when you buy a 3 year TIP you are not really buying a 3 year bond, you're buying maybe a 20 year bond with 3 years to go. You can pick and choose. If you need the money along the way, then high coupon is good but if you are holding to maturity and won't need the interest, LOWEST coupon might be the answer. It sort of behaves like a "zero coupon" (We might think of super low yielding TIPs as "near zero coupon bonds". Whcih brings me to the next similar point. I'm thinking to avoid reinvestment risk, instead of a 3,4,5,7 year tBond, buy the STRIPs instead. Tiny bit more yield, NO reinvestment risk. Trade off is NO interest along the way, more sensitive to interest rate moves. I'm actually going to buy a 50K 20 year zero ytw around 5% JUST as a "can't lose" proposition. (Cost about 20K, if rates dive, big cap gain, if they plunge, still get my 50K in 20 years)
3. What about GSE's? I've got one FHLB 10 year around 6% if I remember right. They seem to have less of inverted yield curve (not much but a little), and are supposedly only incrementally more risky than treasuries, WAY less risky than corporates. Thoughts?? I almost think, "Why even touch treasuries in lieu of agency bonds? I'd love some thoughts on this though.
4. If I sound like I know what I'm talking about, please don't be fooled. I'm JUST wrapping my mind around this stuff, so please give me the proverbial face punch if I need it and set me straight.
