Municipal Bond Forum
Disenchanted with CDs, looking at munis
Q
I’m 83 years old and have never invested in bonds. In the past, I’ve been in stocks and mutual funds, but in 2009 I sold everything and invested in CDs. With the level that CD rates have dropped to, I’ve been thinking of bonds. My principal concern is loss of capital as a result of rate increases. My secondary concern is length of term. Can you give me any advice?
A
James A. Klotz responds:
You may be aware from reading our articles that we are proponents of investing in high quality, long-term bonds to maximize tax-free cash flow, with the understanding, of course, that only funds that do not require transactional liquidity are to be utilized.
Actually, the older the investor, the more he/she is likely to have need for this additional income.
There is nothing gained by trying to outlive your bonds, which are easily passed to heirs on a date-of-death cost basis.
Remember, sometimes your bonds will be worth more than you paid for them and sometimes less, but you are not seeking capital gains.
Start here.
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