Tag Archives: personal-finance

Why Bond Funds Fluctuate and a Safer Alternative

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How a 20% slide in the Lord Abbett Income A (LAGVX) happened — and how CDs can help.

 The Price of LAGVX from Jan 2021 – Jun 2025 was down 20 %

Bond Math on a Napkin

LAGVX holds intermediate‑term corporate bonds with an average duration of about 6½ years.  Duration is a measure of how volatile a bond will be – the greater the number, the more the bond will fluctuate in changing interest rate environments.

  • Bonds pay fixed coupons, but the market discounts those coupons at today’s yields.
  • When yields rise, the discounting is tougher, so prices fall.
  • Since early 2021, yields on similar bonds climbed roughly 3 percentage points (10‑yr Treasury 1.5 % up to 4.4 %; BBB credit spreads 0.8 % up to 1.1 %).
  • Rule of thumb: price change ≈ –duration × yield change, so -6.5 × 3 % ≈ –20 %. That’s exactly what showed up in the fund’s price as shown in the chart above.

The Climb Back

A 20 % decline means the fund needs a 25 % gain just to break even. Using the same duration math, that would require yields to drop roughly 3.5 percentage points — essentially a return to the ultra‑low‑rate environment of 2021.

Where Inflation Fits In

If inflation stays elevated, the Federal Reserve may keep rates higher for longer. That delays the yield drop LAGVX needs to recover, while inflation will also erode the real spending power of the coupons you do collect.

CDs: A Safer Alternative

Pairing your bond fund with a ladder of FDIC‑insured certificates of deposit can take the edge off rate shocks. Here’s a quick comparison:

Bond FundCertificate of Deposit
Price jumps around with interest‑rate moves.Even though the price fluctuates slightly, you will still earn your principal amount if held to maturity.
Income floats as the manager reinvests; price swings can swamp coupons in the short term.Guaranteed payout schedule if held to maturity.
Carries both rate risk and bond‑issuer credit risk.FDIC‑insured up to $250 k per bank (principal and Interest); no market risk if held to maturity.


Think of a CD as “sleep‑well” money. It won’t skyrocket if rates plunge, but it also won’t sink if rates rise. Holding a CD ladder can help you:

  • Lock in today’s higher yields.
  • Buffer portfolio volatility while you wait for bond prices to heal.
  • Retain your purchasing power steadier if inflation rises.

 The Take‑Away

Bond prices and their yields move like a seesaw. LAGVX slid 20 % because yields popped by about 3 percentage points. To claw that back, yields must fall by roughly 3.5% — a tall order unless the economy slows sharply and inflation retreats. CDs provide a straightforward hedge: fixed, insured income that doesn’t gyrate with daily bond‑market headlines.

By Greyson Harris

Pick up the Pencil Before the Racquet or Driver

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Congratulations! You are recently retired and all your saving and planning over the years have finally paid off. You feel optimistic about your future and you are deciding whether to start playing more golf or maybe try out tennis at the local club. However, before you pull out your racquet or driver you must first plan for your spending throughout retirement.

Budgeting your retirement savings and plan for your withdrawals is crucial to enjoying life once you have successfully retired. Let’s look at three different examples of great savings, fair savings, and poor savings throughout retirement. Jack Didgreat, Jill Didfair, and John Didpoor are three individuals who each accumulated $1,400,000 in retirement savings by the start of their retirements at 65 years old, and generate a conservative investment return of 4% annually.

Investment Account$300,000(dividends & capital gains)
Traditional IRA$700,000(distributions taxable)
Roth IRA$50,000(non-taxable)
Pawleys Dividend Fund$300,000(dividends & capital gains)
Bank savings$50,000(interest taxable)
 $1,400,000 

Here are the distributions and spending stories of the $1,400,000 for all three individuals:

Jack Didgreat decided he would withdraw $2,500 monthly and an additional $40,000 each year. When he planned it out, he would still have $569,403 at 96 years old, giving him financial room for other purchases throughout retirement, and safety for whatever life throws at him.

Jill Didfair decided to plan her savings like Jack, but decided to withdraw $3,000 monthly and an additional $45,000 each year. Doesn’t seem like that much more than her friend Jack, right? Jill Didifair would actually run out of her savings at 94 years old, which does not give her much financial room throughout retirement and leaves her with nothing to support herself past 94. It is crazy how Jill spending an extra $500 dollars each month and an extra $5,000 each year leaves her with nothing compared to Jack!

John Didpoor did not create a careful plan and decided to withdraw $4,000 monthly, and an additional $80,000 each year. John Didpoor also decided to buy himself a new truck at 71, and a new pool at 74. John was so excited for retirement spending that his savings actually ran out at 82 years old. John did not plan well and had to determine a new method of income to support himself past 83 years old.

When creating a plan, one of the most important things to note from this example is how a little can go a long way. These three examples shed light on the importance of careful retirement spending and a well-devised plan. In comparing Jack Didgreat’s spending plan to Jill Didfair’s spending plan, the two do not seem much different. Jill Didfair only spent $500 more than Jack monthly and $5,000 annually, for a total of only $11,000 more than Jack each year of retirement. However, once Jill reached 95 years old she was out of money, and Jack still had $569,403 in savings. That difference is substantial! As articulated throughout these spending scenarios, it is incredibly important to make a plan for retirement spending before you realize you are in the same shoes as John Didpoor.

Contributed by Sam Bassett.