A.I.M. Users Bulletin Board

[ls7550]

From a very quick/casual glance for UK investors, from http://www.moneysupermarket.com/savings/fixed-rate-bonds/ a current 5 year bond ladder using protected bank bonds could currently be formed with respective 1, 2, 3, 4 and 5 year yields of

1.65%
2%
2.5%
2.65%
3%

Which averages 2.4%

Takes 4 years for such a ladder to become established (all purchases were 5 year maturity at the time of purchase) and are illiquid (typically must be held for the entire term). After that 4 years the average yield tends to be higher than the initial construction (proportionately).

For less liquid bonds using leveraged ETF's can help. If you hold $100,000 of stock and AIM or whatever is suggesting increasing that to $110,000 then sell $10,000 of 1x and buy $10,000 of 2x with the proceeds. When a bond does mature you might swap back to holding just 1x again (sell the $10,000 of 2x and combine the proceeds from that with $10,000 of maturing bonds to buy $20,000 of 1x stock).

And/or for a 5 year corporate bond ladder you can pick out potentially higher yields http://www.fixedincomeinvestor.co.uk/x/bondtable.html?groupid=3653 where the risk of default might be relatively low ... and being tradeable in the secondary market are liquid.