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A financial advisor told me the pros of building a two-part bond ladder (three-year Treasurys and 10-year corporates) to generate fixed income and cover required minimum distributions (RMDs).
Bond ratings significantly impact a bond ladder strategy. Higher-rated bonds are generally preferred as they offer a more reliable stream of income and predictable value at maturity.
Laddering can free up capital as needed. A person may purchase a shorter term bond in the event that he needs the capital soon to fund his children's tuition while purchasing other longer term bonds that mature later as retirement spending with a more favorable rate, assuming the economy is experiencing a normal yield curve during this time.
Bonds can offer a safe way to invest and earn consistent interest income over time. A bond ladder exchange-traded fund (ETF) offers exposure to multiple bonds with varying maturity dates.
The credit rating is a financial indicator to potential investors of debt securities such as bonds.These are assigned by credit rating agencies such as Moody's, Standard & Poor's, and Fitch, which publish code designations (such as AAA, B, CC) to express their assessment of the risk quality of a bond.
A bond ladder is a way to structure your investment in bonds, with bonds maturing at regular intervals. For example, an investor might have bonds with maturities every year for the next five years