In This Letter:
 Life Planning Partners, Inc.Website   Carolyn's Blog: "The Quest for Simplicity"
 Carolyn McClanahan, M.D., CFP®
 Tim Utecht, CFA
 Carrie Jones, CFP®
 Krissy Di Candia
 Greetings, The year is flying and we've been busy. Thankfully we have no big news to report for the quarter. Carolyn made it through tax season and will now concentrate on estate planning updates, Carrie is continuing work on projections and insurance, and Tim is plowing along with the investments - keeping everything balanced in this crazy world. And of course, Krissy is the glue keeping us on track with the work flow.   We are planning the shred party for the fall, and will let you know the date once we have it pinned down. Keep all your shredables so we can make plenty of toilet paper!   With health care reform back in play, Carolyn has been pulled back into the discussion and is writing for Forbes and Financial Planning Magazine.  Last week, she had the honor of her first byline in the New York Times. Here is a link to the article if you are interested - https://www.nytimes.com/health-care   Have a great summer!
 What Happens to Bonds When Interest Rates Change? Interest rates and bond prices have an inverse relationship-rates and prices are like opposite ends of a seesaw - when one rises, the other must fall. It's all about math... Any bond with a fixed coupon (periodic interest payment) becomes less attractive if other similar bonds are available with higher coupons. To make a lower coupon bond comparable to higher coupon bonds, the price will need to be reduced. A simple example A ten-year bond with a \$10,000 face value and 6% coupon would pay \$600 interest annually. At the end of the ten year period (maturity), you would receive back \$10,000. If you pay \$10,000 to buy the bond and collect all payments, the yield-to-maturity (annualized return for the life of the bond) would be 6%. In comparison, buyers would not be willing to pay the same \$10,000 price for a similar bond with a 5% coupon (all else equal, 6% beats 5%). A price of around \$9,250 would be required for the buyer to earn the same 6% return. The lower price makes up for the smaller interest payments that will be collected. How does this impact you? A few things to note regarding changes in interest rates: Cash flows don't change: Interest payments and maturity value remain the same regardless of price fluctuation  Yield-to-maturity (YTM) doesn't change* after a bond is purchased: The return is based on purchase price and anticipated cash flows - interim price changes aren't part of the equation. * For the mathematically inclined, it should be noted that the YTM does assume that all interest payments can be reinvested at the same constant rate.  This may not be an accurate assumption. Rising rates have a negative impact in the short-run and a positive impact in the long-run: Bond prices adjust downward when rates rise (see the example above), but cash flows will be reinvested at higher rates.  Longer-term, higher interest payments are beneficial. A "bear market" for bonds is not the same as for stocks: Stocks periodically have "bear markets" generally defined as declines of 20% or more.  The broad U.S. bond market has never experienced a decline anywhere close to that magnitude.  For bonds, a bear market is often considered to be simply a period of negative returns, and even those circumstances are infrequent.