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http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment Municipal Bond Investment Municipal bond investment may be an attractive option for investors in the coming year. When the Fed eventually cuts its quantitative easing stimulus plan rates will go up. That will make bonds attractive. However, with higher interest rates come higher taxes. Municipal bonds have the advantage of not carrying a Federal Tax burden. Municipal bond investment may be a good conservative version of today’s value investing.
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Municipal bond investment may be an attractive option for investors in the
coming year.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
When the Fed eventually cuts its quantitative easing stimulus plan rates
will go up.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
That will make bonds attractive. However, with higher interest rates
come higher taxes.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
Municipal bonds have the advantage of not carrying a Federal Tax burden.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
Municipal bond investment may be a good conservative version of
today’s value investing.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
Municipal Bonds
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
A municipal bond is issued by a municipality.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
That is local government or government agencies, not the state or federal
government.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
Issuers can include school districts, airports, utilities, and more.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
The bonds can be a general obligation of the municipality to repay or may be
tied to an income stream such as taxes assessed at an airport or property taxed
assessed to support a school district.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
What makes municipal bonds attractive to those in high tax brackets is that
their interest is typically exempt from federal taxes and often free of state or
local taxes as well.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
When an investor looks at the return from taxable corporate bonds or
dividends on dividend stocks he or she will calculate the return on investment
after taxes when comparing the investment to a municipal bond
investment.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
Safety of Municipal Bond Investment
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
Municipal bond investment is historically pretty safe.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
That should be said as the headlines are full of news of huge state and local
deficits.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
However, over the last decades the default rate on municipal bonds has
been less than 1% while the default rate on corporate bonds has been over 10%.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
Nevertheless, municipal bond investment in more than one
municipality in order to balance risk is not a bad idea.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
A fundamental analysis of municipal bonds should include a number of
specifics.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
. Not all municipal bonds are tax exempt!
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
A bond offering will typically come with certification by a law firm that the bonds are tax exempt and to what
degree.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
If you as the investor do not live in the municipality or state where the bonds
are issued you will probably not be eligible for a local or state tax exempt
status, if it is part of the bond.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
Bonds are rated by agencies such as Moody’s or Standard and Poor’s.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
To the extent that there is a risk of default it will be wise to make sure that
the bonds have an investment grade rating.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
As of 2008 there had never been a default on a Moody’s or Standard and Poor’s Aaa/AAA municipal bond or a Standard and Poor’s AA rated bond.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
Investment grade municipals in general have a historic rate of default of less
than a fifth of a percent.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
As with all investments the investor should sit down with paper and pencil (or at the computer) and calculate the
return on investment of municipal bonds versus other investments
considering the relatively low level of risk involved.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
Depending upon if the stimulus program goes away rates may or may
not rise.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment
If so municipal bond investment may be an attractive vehicle for those soon to
be paying higher taxes.
http://www.profitableinvestingtips.com/bond-investing/municipal-bond-investment