Navigating rising rates with strategic bond allocation.
The Johnsons, with $2.1 million in retirement accounts, were increasingly worried about the impact of rising interest rates on their bond holdings. They allocated $250,000 to bonds, but the eroding value, coupled with the looming costs of three children's college education, created significant financial anxiety. They feared they weren't maximizing yield or adequately protecting their principal.
Using Golden Door Asset's Bond Yield Calculator, we analyzed the Johnsons' existing bond portfolio and identified opportunities for improvement. By shifting a portion of their holdings into higher-yielding, shorter-term bonds and using the Tax Equivalent Yield Calculator to evaluate municipal bond options, we increased their annual bond income by $3,750, while also reducing their overall interest rate risk. The Credit Spread Calculator helped to identify bonds with favorable risk-adjusted returns.
The Bond Yield Calculator was used to determine the yield to maturity (YTM) of existing bonds and compare them to alternative investment options. The Tax Equivalent Yield Calculator allowed the Johnsons and their advisor to compare taxable bonds to tax-exempt municipal bonds.
$3,750 increase in annual bond income and mitigated interest rate risk, protecting $250,000 in bond assets.
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