What Are Municipal Bonds

By | September 19, 2013

Growing Money

If you are looking for a bond to invest in you can try a municipal bond, these are issued by companies and the government to build and grow. It will depend on the bond and the state that you live in whether you will be exempt from some taxes, so it is important that you check the regulations out.

You are not tied to this bond and you are able to buy and sell a municipal bond. The bonds value is the amount that is stated on the bond and at the time of issue the company selling the bond will give the coupon value and the maturity date. The maturity date will decide when and if any coupon money is paid at certain points or just at maturity. If the term is very short then the coupon will be paid at maturity. The longer term bonds the coupon is paid every six months and then the full capital on the maturity date of the bond.

Where to buy from

You will have a choice where you chose to purchase your bonds; you might get them direct form the company when they are being issued. Or you can get them through a broker, whichever deal gives you the best value for money.

Risk

The higher the coupon value is will show you those that are at the higher risk of default. This can put your capital at risk. The longer the term of the bond the longer time that you are able to wait until the market picks up. If the company was to go bust then you would be in a better position than if you had just purchased shares in the company. You will be higher up the creditors list.

What is a municipal bond?

A municipal bond is a safe option to buying bonds than a corporate bond; a corporate bond has higher coupon values and a higher chance of the payment not being made available through various reasons. The higher the coupon rate the more risky the bond.

If you are looking for a twice yearly income then you might want to consider a mutual bond. It pays out the interest payments twice a year and some areas they are completely tax free. This makes them a good retirement products to have.

The bond is issued on the amount of money that is stated on the front of the bond. This will be returned to the investor, or who the investor sold to. During this period there will be twice yearly payment of interest. If you need the capital returned this can happen through the selling of the original bond to a new investor. Unlike other bonds there are less restriction placed on these.

Portfolio

If you are looking for a balanced portfolio then it might be beneficial to have the option of a twice yearly income to boost your investment account so that you are considering increasing your capital. This will have a positive effect on the amount of growing money that you will be aiming for.

 

 

Leave a Reply

Your email address will not be published. Required fields are marked *