Municipal Bond Forum

Home > Municipal Bond Forum > Other Topics > Who to trust?

Q

It seems that every time I suggest to my broker that he consider some of your Web site information that contradicts his opinion – for example, waiting for interest rate moves and a laddering approach – he dismisses it as being information that is designed to encourage investors to put all their money in a bond program, rather than other alternatives. How do you determine what’s best for the average investor?

A

James A. Klotz responds:

Why not make your own observations and trust your common sense? After all, it is you who will ultimately be responsible for your financial security, not your broker.

We have never suggested that investors have 100% of their funds in tax-free bonds, but bonds should be an integral part of every portfolio.

We only claim expertise in tax-free bonds, and in this regard it is indisputable that long- term, tax-free bond buyers whose goal is to maximize income on each purchase have fared considerably better than those who have been persuaded to utilize a 10-year laddered approach.

Your common sense will confirm that since interest rates have been declining or steady for the last 30 years, the short-term, 10-year laddered portfolio that sacrifices
40% to 60% of available income has been a costly strategy.

Your broker’s attitude is not uncommon or unfamiliar to us. It is the reason why so many of our clients buy equities and other investment products from various brokerages, but come to us for tax-free bonds. In fact, almost 50% of the bonds we sell are delivered to our clients’ accounts held at other firms.