Municipal Bond Forum
Necessary to diversify out of state?
Q
I hold a 10-year laddered portfolio of Maryland state and county bonds. All are rated “AAA” to “A.” Does it make sense to diversify to other high quality states to reduce risk? Does losing my in-state tax advantage of 7.5% offset multi-state diversification?
A
James A. Klotz responds:
If you are comfortable with the credit quality of your portfolio (and based on your description, it appears you can be), we see no reason to purchase securities issued in other states.
The state of Maryland continues to afford an abundance of credit-worthy securities to satisfy your desire for safety and diversification.
There should be no need to sacrifice the income, which would be subject to Maryland state taxes on out-of-state bonds.
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