Municipal Bond For Dummies

When one buys municipal bonds for dummies they are a host of things which one has to ponder. First and foremost is the rating of the bonds. Some of the bonds are not rated and you cannot sell them when you want, so that it indeed makes it a risky proposition of sorts. It is suggested to opt for bonds with AAA rating and they are some municipal bonds for dummies which have lower ratings but offer higher yields, but one should not opt for it as the risk factor is huge.

In this regard one needs to understand the definition of municipal bonds in the first place. They are issued by the government as well as the agencies. The potential issuers of it may some form of public utility services. They can be purchased directly from the issuer or from the bond market. the philosophy is pretty simple as an individual makes an upfront payment and in this regard he receives an interest payment. Some of the interest payments are done semi annually. In the case of short term bonds they are paid at the time of maturity and in the case of long term bonds interest is paid accordingly. The key information about the municipal bonds can be obtained from the official statements or disclosures which are issued by the company. This can go a long way in guiding the investor on what sort of bond to purchase.

In addition to this a lot of municipal bonds for dummies come with an insurance tag attached to it. Along with it one should opt for a bond that has a maturity date attached to it. In the final analysis of things the tax free nature of the municipal bonds for dummies is also a think which you would like to consider. Some other scoops are also to be considered

  • National munis- are those types of bonds which are exempt from federal tax
  • State Munis- if they are purchased by the residents of the same state they are exempt from state taxes and in some cases are also exempt from local taxes as well.
  • The bonds which are exempt from both these form of taxes are commonly referred to as double free tax bonds. In fact those exempt from federal, local as well as state tax is known as triple tax free bonds.

The prime reason for the municipal bonds evolving in stature is that they provide tax free options. Once you have decided to enter the financial market with the purchase of bonds one will be confronted with a series of questions on which bonds to buy, how to buy them and what are the financial objectives of the concerned individual. It is considered as one of the important tools for multiplying your wealth.

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