What You Need To Know About Investing In Municipal Bonds
- Topics:
- Commercial Lending
- Tags:
- Bond,
- Finance,
- FinancialCounsel.com,
- Investment,
- Municipal Bond
- Source:
- FinancialCounsel.com
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Overview: Municipal bonds are the only sector of the bond market where the primary buyers are individual investors. The chief attraction of munis (municipal bonds) is that they are exempt from federal taxes. If a person is a resident of the state issuing the bonds, they are also exempt from state taxes. Overwhelmingly, munis deserve their popularity among individual investors. Even though there are, thousands of issues outstanding, munis are sound and relatively uncomplicated instruments. Nonetheless, buying individual municipal bonds is not quite as simple as buying Treasuries. The buyer of municipal bonds must be aware of a number of issues: The first one is whether or not one would earn more by buying munis than by buying taxable bonds; second, he need to understand credit quality; and finally, commission costs can be high—particularly if he need to sell a bond before it matures. However, commission costs are hidden. This article discusses how to determine whether it pays for one to buy munis rather than taxable bonds, as well as explaining the credit quality of the many types of munis available. One should be aware that ratings might change, and monitor credit ratings of the bonds he own.
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Format: PDF | Size: 35KB | Date: Oct 2002 | Pages: 5
