Municipal Bond Forum
Disenchanted with CDs, looking at munis
Q
I’m 83 years old and have never invested in bonds. In the past, I’ve been in stocks and mutual funds, but in 2009 I sold everything and invested in CDs. With the level that CD rates have dropped to, I’ve been thinking of bonds. My principal concern is loss of capital as a result of rate increases. My secondary concern is length of term. Can you give me any advice?
A
James A. Klotz responds:
You may be aware from reading our articles that we are proponents of investing in high quality, long-term bonds to maximize tax-free cash flow, with the understanding, of course, that only funds that do not require transactional liquidity are to be utilized.
Actually, the older the investor, the more he/she is likely to have need for this additional income.
There is nothing gained by trying to outlive your bonds, which are easily passed to heirs on a date-of-death cost basis.
Remember, sometimes your bonds will be worth more than you paid for them and sometimes less, but you are not seeking capital gains.
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.