Putting Together A Portfolio Of Municipal Bond Investments
- Topics:
- Commercial Lending
- Tags:
- Bond,
- Finance,
- FinancialCounsel.com,
- Investment,
- Maturity,
- Municipal Bond
- Source:
- FinancialCounsel.com
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Overview: This is one of the articles in a series of three dealing with municipal bonds. It highlights some of the choices one need to make when investing in municipal bonds such as how to determine which maturities best fit financial objectives, comparing premium bonds, discount bonds, and zero-coupon bonds; and some tax issues should understand. In real life, unless one has a windfall, he seldom needs to invest all the assets that comprise the fixed income allocation of the portfolio all at once; and that by itself generally results in a portfolio with some diversification of maturities. Any decision one make, however, will of necessity involve trade-offs. Buying only the longest maturities in order to maximize income puts principal at maximum risk. A more flexible approach, centered on buying 10- to 15-year maturities, provides approximately 80% to 90% of the income generated by the longest maturities, with significantly lower risk to principal.
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Format: PDF | Size: 56KB | Date: Feb 2003 | Pages: 6
