Municipal Bonds – Part Two

Buying Strategies
The most basic strategy for investing in municipal bonds is to purchase a bond with an attractive interest rate, or yield, and hold the bond until it matures. The next level of sophistication involves the creation of a municipal bond ladder. A ladder consists of a series of bonds, each with a different interest rate and maturity date. As each rung on the ladder matures, the principal is reinvested into a new bond. Both of these strategies are categorized as passive strategies because the bonds are bought and held until maturity.

Investors seeking to generate both income and capital appreciation from their bond portfolio may choose an active portfolio management approach whereby bonds are bought and sold instead of held to maturity. This approach seeks to generate income from yields and capital gains from selling at a premium.

The Bottom Line
Investing in municipal bonds can have a long-term impact on your income stream and your portfolio. To learn more about the benefits of municipal bonds, contact an investment professional or thoroughly research them yourself before investing your money.

Leave a Reply