Munis

Investing in Municipal Bonds Now

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Is now a good time to be investing in municipal bonds? Also known as muni bonds, municipal bonds are bonds issued by state and local governments. Typically, these bonds are used to finance government operations or capital investments for various local and state government agencies. Like corporate bonds, muni bonds pay interest and return your principal at the end of the bond’s term. Should You Invest in Municipal Bonds Now? Municipal bonds are a great investment opportunity that goes largely unnoticed by most non-professional investors. Muni bonds are safer than stocks over a long period of time and can offer significant tax advantages. When investors do take advantage of investing in muni bonds, it is often via muni bond funds which offers a very different investment experience than investing directly in actual muni bonds. So, is now a good time to invest in munis? Like all bonds, the price of muni bonds moves in the opposite direction of interest rates. That is if interest rates rise, bond prices fall. The Federal Reserve’s benchmark interest rate is currently at zero, which means that the part of bond pricing that is attributable to interest rates can only go down. In essence, bond …

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Safely Earn More Interest on Your Money

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I am always a bit curious when I read a cover story headline like the one on Kiplinger Magazine this month. It says 18 Ways To Earn 5% or More On Your Money. A lot of readers will make an assumption that goes along with that headline that they are talking about low-risk investments or no-risk savings products. After all, it doesn’t take a degree in advanced personal finance to know that there are literally thousands of ways to earn 5% or more on your money. Of course, most of those also come with a way to lose 5% or more on your money too. That is not what the article is about. Instead, this particular article, whose article title inside the magazine is, “Great Rates In A Low-Yield World” manages to give a better clue. The article is NOT about where to open a savings account to earn 5% or more. It is about how to get 5% YIELD on your investment. That is, 5+ percent as income, and not counting losses on invested capital. Real Earnings Are About More Than Dividends and Interest Unfortunately, while the article does indeed uncover available investments earning a 5% or higher yield, …

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How Safe Are Municipal Bonds

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People are always asking me how safe municipal bonds are.  The answer is: They’re Safe. Note that we are talking about BONDS here, NOT Notes, which are a whole different deal.  Unless you are an expert or near-expert bond trader, you should stay away from any and all notes of any kind except those from the US Treasury. But, that can’t be the end of it.  After all, there are some examples of muni bonds going sour, most notably Orange County’s default on some of its muni bond debt.  And, of course, various municipal bonds which were pegged to specific projects or revenue streams have gone belly up.  Of course, it is pretty easy to spot which ones have that kind of risk.  Bonds fully backed by the state, county, or city are generally as safe as you can get without investing in a US Treasury.  Also pretty safe are bonds back by utilities (water and sewer especially) since people have to pay for those one way or another.  The ones you have to watch out for are the ones that are for building a specific project and then funded with the revenues from that project.  Common examples are things …

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