Two questions for you:i really have no idea how efficient it is, but here is what i am doing to handle this issue.Just an curiosity question, for people who do duration matching, they might create a collapsing bond ladder. For example, I could create a 30 years bond ladder where each rung equal 1 year and then put the rest in stocks. Is my stock allocation essentially increasing as I age as I consume each rung or am I misunderstanding duration matching.
I treat my TIPS ladder as a part of my fixed income allocation.
When a rung matures, i look at my AA.
If I am over-weighted in bonds, then I use the money from the maturing bond to fund expenses, nudging my AA back towards its target.
If I am over-weighted in equities, i sell the same amount of equities to fund expenses, and roll the maturing bond over to the long end of my ladder, nudging my AA back towards its target.
If you were overweight bonds by an amount more than your present expenses (let's say stocks crashed), would you sell TIPS beyond the maturing rung to buy stock?
In the second case, would you roll over to the long end regardless of prevalent real rates? How long is the ladder already?
(sorry, three questions)
Statistics: Posted by Circle the Wagons — Fri Jun 21, 2024 11:38 pm — Replies 14 — Views 868