Why invest in Municipal Bonds
Municipal bonds are issued by cities, county or state to raise money for projects such as highways, schools or hospital etc. They provide tax-advantaged income as interest payments from municipal bonds is exempt from federal taxes. If the bonds are issued by the state in which the investor resides, they’re free of state taxes. There are two kinds of municipal bonds: General Obligation and Revenue Bonds. General Obligation bond issuer has the power to tax residents to pay bondholders whereas Revenue Bonds are serviced from revenue collected by projects for which the bond was issued. Income from bonds can result in Alternative Minimum Tax for some investors .
Key indicators to consider before investing
- Business Cycle
- Credit Risk
Municipal Bonds – Calendar Year returns by investment horizon since 2009
Municipal Bonds – Quarterly returns by investment horizon since 2009