Home Forums Hunting & Shooting Hunter's Campfire High Yield Municapl Bond funds, When and why...

Explain the reasoning to me please,,, If your going to add some Municipal tax free Bond funds to your portfolio,

You would add these to your IRA account or standard non-IRA account ?

Where/when would the tax savings be in the IRA account?

And why Municipal Bonds over taxable Bonds?....(other than the obvious).

High yields?

Check out the ratings assigned.

High income people buy them.

Put them in your taxable account. If you are in a higher tax bracket and have State income tax as well, the return can beat taxable bonds in some cases.

Some states do apply income tax on municipal bonds if the bonds are from other states. My states does this.

Yes, lets say I buy a tax free bond fund, but is Residency in my state a factor?

I believe it can be.

In general, avoid municipal bonds. For the most part, they are a very high risk investment.

There was a time that retirees put their money there because it was safe and dependable. Not so much anymore.

Understood, but Fidelity has multiple Municipal Bond funds rated with less risk than , for example, Large Growth Stocks,

Not that I fully understand the topic on hand here.

The idea of a pooled fund is to average out risk, and that's a good idea.... until something like Covid happens, that affects all the cities in the pool.

You're doing your homework. Just keep at it, and you'll know the right thing to do.

I'm looking at a corporate bond fund that tracks the market. The good thing about that is, if we get a spurt of inflation, the yield on new bonds will go up. The bad news is that if you buy a bond that pays 4%, and the market rate goes to 8%, your $1000 bond is only worth about $500 (assuming maturity in the far distant future).

Once upon a time, I had a retirement account to invest. I figured interest rates were going to head down, and I bought AA and AAA corporate bonds with maturity dates not too far out. Sure enough, rates went down and my bonds appreciated. So I did alright. My lucky day.

From where we are, rates can only go up.

When people get worried, they buy gold and they buy guns. You can get a sense of our situation by looking at the price of those items.

Fidelity has some bond funds that aren't taxable, as I understand it.

The bond market is in the toilet though.

If interest rates rise that toilet will get flushed.

Why would you invest in muni bonds within a tax sheltered account?

The Feds can't raise interest rates, Zero or near zero rates are the only thing that supports 20 trill in debt.

tax free muni's should only be in a taxable account, not ira/401k's. i keep a chunk in vanguard's pa tax exempt muni fund. if you want to understand a bit more about them, here is the prospectus of the one i use. it explains things pretty well. one of the biggies like vanguard or fidelity might have a similar one for your state. all in all, i have been quite happy making 5-7% tax free for years in this fund. if i thought that interest rates were going up, i'd rethink it perhaps. but its nice to make money that does not get taxed every stinking year.

https://personal.vanguard.com/funds/reports/q770.pdf?2210160095

I have 2 tax free Muni Etf's. One is HYD and HYMB. They are too high for me right now so I am not buying. At these prices, you will only get about 3.5% interest. That is not good enough for me, especially how high the MUNI market is right now. I bought 4 yrs ago and about 1 yr. ago. Last yr. was a good time to buy them. You will not get taxed on the divies, but the captital gains are taxable. I am sitting on some cash right now cause there is so little to buy right now. I would love to get even 3.5% now if it was tax free, however, I am quite sure they will be coming down 3.5% in a yr. so there will be no real gains at all. If you have them in an IRA, you wont pay capital gains tax, but capital gains are not very much on a MUNI.

Gold has been pretty flat since last November

Gold has been steady for 5000 years.

My financial planner says I should by bond funds or balanced funds heavy in bonds right now to limit risk. I keep thinking that with rates as low as they are it makes no sense buying bonds. Like Denton said if rates start to rise bonds will take a hard hit. There's nowhere else for them to go unless they go negative. I have wondered about TIPS as a hedge against inflation. I'm not sure where to put money that's relatively low risk but still has some return.

Bb

I wouldn’t bet my assets on that statement.
Any upwards bump will directly affect those bonds.

Might want to look into how many muni bonds went broke due to default of the issuer.

Pretty much dead center correct.