Offset Interest Rate Risk In Your Bond Portfolio by Patrick Kelly (NAPSA)—Whether interest O 10-year bondat rates rise or fall, financial experts 6.00% called “bond laddering” may help 8-year bondat agree that an age-old technique people improve their investment returns over time. Bond laddering provides in- vestors with a strategy to minimize 5.00% 6-year bondat 4.00% the effect of changing interest rates by diversifying their bond portfolios by type and term. By allocating 4-year bond at ent maturities (one-year, two-year, 2-year bond at 3.50% their bond investments over differ- etc.), investors avoid having their entire bond portfolio locked into one rate for a long period of time. Here’s how it works: Investors allocate equal sums of money into securities maturing in, for example, two, four, six, eight and 10 years. In two years, when thefirst bonds mature, those funds are reinvested in a 10-year matu- rity—thus maintainingthe ladder. As each bond matures, and if interest rates rise, investors would have the opportunity to reinvest the shorter-term maturi- ties at a higher rate; and if inter- est rates fall, then only a portion of the funds would be invested at a lower rate. In short, bond lad- dering offsets the interest rate risk of investing in bonds of one maturity and removes the mys- tery of relying on markettiming. Any type of bond can be used in a ladder. However, investors looking for investment-grade corporate bonds can purchase a new type of bond, designed specifically for the retail investor, called LaSalle Direct Access Notes, or DANs. The notes are sold by prospectus only and are available in $1,000 denominations. They are priced at par and with a wide variety of maturi- ties and coupon paymentdates. Most DANs also offer a survivor’s option, which allows the C w 3.00% The example above is for illustrative purposes only and does not represent any specific investment. eo ) ) ) ) ) UU ab) A bond ladder may help investors avoid being locked into low interest rates for a long term. estate of a deceased holder to redeem the bonds at par. DANs are issued weekly. Corporations issuing bonds within the DANs program include General Motors Acceptance Corporation, Caterpillar Financial Services Corporation, United Parcel Service, Inc., Freddie Mac, Tennessee Valley Authority, LaSalle Funding LLC, International Busi- ness Machines Corporation, John Hancock Life Insurance Corporation, SLM Corporation, International Lease Finance Corporation and American General Finance Corporation. DANs are available through a network of over 500 broker-dealers throughout the U.S. For more information, ask your broker or financial advisor, or—to build your own bond ladder—visit www.LaSalleDANs.com. Mr. Kelly is Senior Vice President and Managing Director of LaSalle Broker-Dealer Services.
