Municipal Bond Forum
Free from prognostication
Q
I was reading your article, “Bernanke’s Message to Muni Investors” and the comment to “go long.” What exactly does that mean? I have Oregon munis.
A
James A. Klotz responds:
Some investors, to their detriment, attempt to predict the direction of interest rates and time their investment decisions accordingly. With the Fed’s announcement that interest rates would be kept extremely low through at least 2015, the guesswork for those trying to time the market has been effectively removed from the equation.
Trying to predict the market has been a futile and costly exercise, as evidenced by the disappointed investors who’ve parked funds in short-term money market instruments, waiting for interest rates to rise. Our philosophy has always been to “go long”; that is, buy long-term munis to maximize tax-free income. It’s worked for generations of investors who have profited handsomely while sleeping soundly at night. But for those holdouts still trying to read the market tea leaves, the Fed’s actions should, at least, release them from the burden of trying to be market prognosticators.
Start here.
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The responses provided in this forum are meant to address specific questions posed by investors about their municipal bonds and to provide market insight for our general audience. Please note, your investments, objectives, results and experience may differ significantly. Our answers and any potential strategies discussed should not be construed as a solicitation to buy nor sell any security or investment product. All investing entails risk.