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Market says its smart to hold your bonds

Q

I read your article, “Don’t Try this at Home,” and was wondering whether I should sell bonds that have appreciated and use the profits to buy other bonds, or just hold the bonds I own.

G.S., New Jersey

A

James A. Klotz responds:

There is rarely a good reason to sell bonds at a profit because the results are not beneficial. Market factors will not allow you to buy new bonds that produce as much income as you were earning on the bonds you are selling; worse, you will pay a tax on the gains, leaving you with even less proceeds to reinvest.

As with any general rule, however, there are exceptions. For example, we describe a current opportunity to sell your bonds in the article, “The Upside of Lower Rates”.

Apr 16, 2012

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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