Buying Municipal Bonds: 10 Tips

Curious about buying municipal bonds and 10 tips to help you get started? It can be useful to use municipal bonds as an investment. There are many different ways to invest in municipal bonds. There are both tax-exempt bonds and taxable bonds, depending on the issue. You should diversify your municipal bond portfolio by varying the maturity dates of the bonds you buy.

1. There are municipal bond Exchange Traded Funds, or ETFs, that you can buy. ETFs have a variety of municipal bonds built into the price, with different maturity dates.
2. Buy both short-term and long-term individual municipal bonds. Diversify your portfolio by using bonds with different maturity dates.
3. Purchase a zero coupon municipal bond. Many zero coupon municipal bonds are not taxed at the federal, state or local level.
4. Invest in a bond unit investment trust. You will be able to earn interest income until the trust matures, and then you receive your original investment amount back.
5. Buy a municipal bond mutual fund. A fund will help diversify your municipal bonds over a broader range.
6. Use municipal bonds to hedge your overall portfolio. Buy short-term and long-term municipal bonds, a bond mutual fund or use a bond ETF to hedge your portfolio.
7. A money market fund can include municipal bonds. Usually a money market fund has a three-month maturity or less. You are able to withdraw money from the money market fund whenever you need, making it a convenient liquid investment.
8. Keep an eye on your municipal bond maturity date. If you own several municipal bonds, it is easy to forget when one is maturing. Write down the maturity dates of each of your municipal bonds.
9. Invest in municipal bonds on a monthly basis. Buy bonds monthly, instead of committing all of your capital at once.
10. Monitor your municipal bond portfolio on a regular basis. Keep some cash available so you can buy a municipal bond ETF or bond mutual fund after a drop in prices.