Municipal Bond Forum
Are you ever too old for long-term bonds?
Q
My wife and I have followed your advice about seeking high income in quality long-term bonds held to maturity and are happy with the results. Now, at age 67, we are still adding to our holdings and would like to have your thoughts on the factors that might go into a choice of maturity length. A 30-year-bond may well outlive us, for example, but provides a better yield than a 20-year bond and should be the better choice if, as we hope, we never have to sell it. Is this still the case if an unforeseen event should require us to sell in 20 years? Should we be buying some bonds with shorter maturities (10 to 20 years) or is longer term still the best choice?
A
James A. Klotz responds:
We are pleased to hear you are happy with your bond portfolio.
We still would opt for the bonds that maximize your income, particularly if the rate advantage is meaningful. Keep in mind that as the years go by, the original longer-term bonds you purchased become shorter in duration while the additional income from your long-term bonds will help cushion market volatility.
Another investor, R.F., asked us if long-term bonds made sense for investors in their mid 70s, and our answer is the same as above.
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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.