r/investing
Municipal bonds in a fluctuating market
Author considers municipal bonds for tax-advantaged 5% yield, weighing call/default risks against AI-heavy stock market concentration.
- Tax-exempt 5% yield is equivalent to 7-8% taxable yield, outperforming CDs and HYSAs.
- Provides portfolio diversification away from AI-heavy stock market and volatile precious metals.
- Callable risk: issuers may refinance at lower rates if interest rates drop.
- Default risk and potential for higher inflation driving interest rates up.
Any of yall thinking about adding in some munis to the mix since they haven’t fallen off as much as CDs and HYSAs plus the obvious tax advantage of their interest not being taxable income?
Many 20 year municipals are still near 5% without paying a premium in the primary and secondary market.
Downside: interest rates may run higher with inflation, but the new fed chair seems unlikely to hold rates high long term.
These are also callable meaning if interest rates do drop, municipalities may call them and reissue at a lower rate. There is also the risk of default; be sure to review the rating and finances of any issuer before purchase. I’m only purchasing A+ or higher.
Upside: 5% without taxes is equivalent to 7-8% for states without income taxes, possibly more if your buying in state in a state with income taxes.
This is not advise, but a forum for discussion. Simply wondering if anyone’s is diversifying their portfolio with Gold and silver still running down from all time highs, the stock market being strongly AI focused and general uncertainty about the future.
I found holding individual Munis to be a PITA. Buying at a good price is hard, selling at a good price takes a miracle. Also they can get called for other reasons beside the interest rate that can be disadvantageous to the holder. I have done better with closed-end leveraged munis funds - NMZ NAD MHD. They pay 6 or 7%
Sure, I have plenty of munis; my taxable rate for the next 8-9 years is brutal.
I know it seems dumb but be happy it’s a good problem to have
I will buy one bond when the yields hit 8%. I will not buy a bond that is less than A rated.
I do not even look at bonds at this time.
Yes got into them this year. So far so good. VCADX, VMLUX, and VWSUX.