An Overview on Municipal Bonds

To maintain infrastructure is a vital necessity to governments, and can be costly to do.  This need brought about a new way to invest: investing in municipal bonds.  These bonds have less risk than other investments; one can easily check the issuing governments previous success on repaying its obligations, as well as what others who have purchased the municipal bonds thought.

Buying Municipal Bonds

The basic idea of the municipal bond is to “…to raise money for public purposes—such as building schools, highways, hospitals, sewer systems, and other special projects.”.  These bonds can be issued from states, cities, counties, and other governmental entities.  Many sales of municipal bond vary and so each must be analyzed on its own. One concern when investing in municipal bonds is the lack of information available about these bonds.  This is due to the fact that municipal bonds trade infrequently.

Tips for Buying Municipal Bonds

  1. Since each municipal bonds is unique, one should rely heavily on the credit ratings.
  2. Know who is responsible for servicing the interest payments on the municipal bonds
  3. Understand the economics of the municipal bonds
  4. Ensure that the risk is minimized as much as possible before investing

Municipal Bond Yields

Municipal bonds are issued by governments, so the odds of repayment are relatively high.  Even though municipal bonds are considered relatively conservative investments, like all investments, they municipal bonds carry risk.  Some people overlook this risk because it is a government who is indebted to them, but just like any company, a government can default on a loan.

Books on Municipal Bonds

Books on Municipal bonds are available on various websites.  One can find a listing of books and from the Library of Congress, which provides an extensive library of for reference on the topic of municipal bonds.   Other books can be found on Amazon, such as ‘Keys to Investing in Municipal Bonds (Barron’s Business Keys)’ .

Municipal bonds may not be offered by any one entity regularly, government deficits speak for the demand for money by governments. Municipal bonds can become a great investment with low risk and fair returns if one puts in enough effort to review the various opportunities they have.

By – Domenic Gabriella for