THE ONLY Financial Focus
REECE’S TIRE DEALS
New Location
(Old Kelly Building)
Help climb over interest rate
283 Weaverville Hwy.
Over 30 years experience!
Fastest service in town!
worries with bond ladder
As an investor, you need to so, you buy several bonds, with Here’s one more point to keep
look back no farther than last varying maturities — short-term, in mind: Try to avoid building
year to understand why it’s not intermediate-term and long- your ladder with bonds that
a good idea to own only stocks. term. Once you’ve constructed provide little or no call protec-
In fact, many people buy bonds your ladder, you’ll have some tion. When market interest
Same friendly faces & quick
to lessen the impact of volatility advantage in all interest-rate rates fall, bond issuers will often
service that you’re used to,
on their investment portfolios. environments. When market “call” bonds — that is, they will
just at a new location.
Yet, just as stock prices move up rates are low, you’ll still have redeem the bonds before they
and down, bond prices also f luc- your longer-term bonds earning mature — so they can issue new
tuate, primarily in response to higher interest rates. (Typically, ones at the lower rates. You can
New & Used Tires
Lawn & Garden Tires Danny Whitted
rising and falling interest rates. longer-term bonds pay the high- help reduce the call risk in your
Custom Wheels owner since 1998
These interest-rate movements est rates.) Plus, only a small por- bond ladder by purchasing bonds
can wreak havoc on your bond tion of your bond portfolio (the with call protection, which can-
Mon-Fri.-8-5:30 – Sat 8-12 • Closed Sunday
portfolio unless you can help maturing short-term bonds) will not be called before a certain
828-645-6666 or 252-2254
yourself climb over them with a need to be reinvested at the low date.
“bond ladder.” rate. And when market interest Ladders, by definition, can
Before we examine what goes rates are high, you can reinvest help you surmount obstacles.
R
into a bond ladder, let’s review the maturing short-term bonds And the same is true with bond
euben some bond basics relating to at the higher rates. ladders. If you want to invest
C
aldwell Drilling, Inc.
price and interest rates. Suppose, You can further diversify your in bonds, and help reduce the
for example, that you a buy a ladder by choosing different impact of interest-rate move-
$1,000 bond that pays five per- types of bonds or even certifi- ments, consider building your
cent interest and is scheduled to cates of deposit (CDs), for the ladder soon.
(828) 254-3581
mature in five years. Each year different “rungs.” This diversi-
that you hold your bond, you fication can’t guarantee a profit This article was written by
“All your water needs since 1953”
will receive $50 in interest; at or protect against a loss, but it Edward Jones for use by Bill
the end of five years, you’ll get may help you reduce the nega- Boughton, Weaverville’s lo-
your $1,000 back, provided the tive effects of a downturn that cal Edward Jones Financial
351 New Leicester Hwy. ~ Asheville, NC 28806
issuer doesn’t default. However, primarily hits one type of bond. Advisor.
if you decide to sell your bond
before the five-year period is up,
you could get more or less than
“The Lord is my strength and song
$1,000 for it. If market inter-
and is become my salvation” Psalms 118:14
est rates — the rates paid on
newly issued bonds — were to
Sam’s Radiator
drop to four percent, then your
higher-paying bond is considered
more valuable to investors, so
& Auto Service
you might be able to sell it for,
say, $1,050. Conversely, should
Call owner Sam McAbee
market interest rates rise to six
828 252 5070
percent, nobody will pay you
full value for your lower-paying
889 Riverside Drive • Asheville, NC 28804
bond, so you would have to sell it
at a discount, perhaps for $950.
D
Because market interest rates
constantly rise and fall, the value
Now Accepting
r
.
of your bonds will do likewise.
G
This could be a big problem if
you wish to sell bonds before they
mature and use the money to buy
New Patients!
r
e
new bonds. Keep in mind that if
g
bonds are sold prior to maturity,
you can lose principal value.
General Dentistry
o
r
y A
To help reduce the impact
of rate swings, you might want
to build a bond ladder. To do 828.645.5009
. G
St Matthews
od
Anglican Church
Hours
812
l
Reems Creek
8 am - 5 pm
e
Rd.
Mon., Tues., Thurs., & Fri.
y
, D
Weaverville
Closed Wed.
(Lunch 12 - 1)
828-877-3708
M
www.stmatthewsasheville.org
S
D
unday — 10am Bible Study / 11am Eucharist
165 North Main St. Weaverville, NC 28787
6 THE TRIBUNE - Feb 5 - 11, 2009
www.weavervilletribune.com
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