Offset Interest Rate Risk In Your Bond Portfolio (NAPSA)—Whether interest rates rise or fall, financial experts agree that an age-old technique called “bond laddering” may help people improve their investment eo (one-year, two-year, three-year, etc.) investors avoid having their entire bond portfolio locked into one rate for a long period of time. It’s a concept similar to dollar cost averaging. Here’s how it works: Investors allocate equal sums of money into securities maturing in, for exam- ple, 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 maintaining the ladder. As each bond matures, and if interest rates rise, then investors would have the opportunity to reinvest the shorter-term maturities at a higher rate; and if interest rates fall, then only a portion of the funds would be invested at a lower rate. In short, bond laddering offsets the interest rate risk of investing in bonds of one maturity and removes the mystery 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 maturities and coupon paymentdates. 6.00% 8-year bond at returnsover time. Bond laddering provides investors with a strategy to minimize the effect of changing interest rates by diversifying their bond portfolios by type and term. By allocating their bond investments over different maturities 10-year bond at 5.00% 6-year bond at C 4.00% 4-year bond at 3.50% 2-year bond at 3.00% The example above is for illustrative purposes only and does not represent any specific investment. A > ) ) ) ) a) A bond ladder may help investors avoid being locked in to low interest rates for a long term. An added feature of most DANsis a survivor’s option, which allows the estate of a deceased holder to redeem the bondsat par. DANs are issued weekly so investors can take the necessary time to make an intelligent, informed decision. Corporations issuing bonds within the DANs program include General Motors Acceptance Corporation, Caterpillar Financial Services Corporation, United Parcel Service, Inc., Freddie Mac, Ten- nessee Valley Authority, LaSalle Funding LLC, International Business Machines Corporation, John Hancock Life Insurance Corpora- tion and SLM Corporation. DANsare 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.
