Municipal Bond Forum
California munis now over 6%
Q
I was told at Chase bank that I could get 4 ½% to 5 ½% tax-free interest on a California muni bond, insured by the SIPC, with an investment of $70,000? Is that true? Is that a safe investment? How do they get their commission on that?
A
James A. Klotz responds:
Yes, an investor can earn 5 ½% today on a California general obligation municipal bond, depending on the maturity date. You are, however, misunderstanding the role of SIPC.
SIPC does not insure your stocks or bonds. It helps individuals whose money or securities are stolen by a broker or put at risk when a brokerage fails for other reasons. In these cases, SIPC coverage has a ceiling of $500,000 per customer, including a maximum of $100,000 for cash claims. Most brokerage firms however, carry excess SIPC coverage which has considerably higher limits per account.
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