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Municipal bond information you absolutely need to know before investing
Municipal bonds have historically been one of the few areas of more secure risk investments. All this has changed with today's economic woes. Investors must do a lot more in depth research before randomly placing their hard earned money in municipal bonds to make sure they select the right ones for their investment needs. There are still many municipal bonds that far outshine the mainstream stock investments.
Tax free municipal bonds should be the first thought. Due diligence in making sure that the municipal bond information is indeed tax free is a priority. Many of the municipal bonds that elude to be tax free are later deemed not qualified by the IRS. There are a number of reasons for this, but it is mostly due to the type of investments that the company has done.
Insured municipal bonds are a low risk selection. These are bonds that are insured by a third party, in the case that the company defaults on payments. The down side on this is that there has been a reduction in the number of insuring organizations. These remain the best of the municipal bonds for investment.
Low risk versus high risk. Some newer companies may have entered the market and are considered high risk due to lack of longevity and performance history. New does not necessarily mean high risk. The emergence of high end technology as well as green companies is proving to be an excellent consideration. They are growing in popularity as well as yield. Low risk municipal bonds typically have lower yields but are also a good long term plan.
Economic status of city, state or local government is a more recent key note. Some of the government situations have taken a downward turn due to the bad economy. An on-line demographic status check combined with consultation with an investment counselor can assist in ensuring that you have a more solid investment. Some of the municipal bonds of five years ago looked good, only to lower in yield as a city, state or local government began to experience problems.
The gap between the ratings comparisons is a key indicator of basic municipal bond information. Combine that gap with the assets and duration (longevity of performance) and you can get a long and short list for your investment selection.
There are a number of reliable on real time on-line resources that you can consult. Using multiple resources will give you a good picture of the performance and specific municipal bond information that you are seeking. Your selections for investment will depend upon your personal financial goals. Long term versus short term and the balance that you want to lean towards for high or low risk.
The condition of your portfolio is a topic you should also look towards. The adage of not putting all your eggs in one basket still stands and is more important today than ever. A well balanced portfolio will allow excellent gains to offset any unforeseen losses that might occur with unexpected trends.
The information supplied in this article is not to be considered as medical advice and is for educational purposes only.
|Bond Investment9 Mar 2010|