Municipal Bonds For Dummies: Buying

: Allow you to invest in a diversified pool of munis for a much lower minimum (as little as

: They provide a predictable, fixed stream of income, usually paid out twice a year. Common Types of Municipal Bonds buying municipal bonds for dummies

Because munis are tax-free, they usually offer lower interest rates than taxable bonds. To see if they are a better deal, use the formula provided by Dummies : Find your Reciprocal : Calculate : Example: A muni for someone in a tax bracket has a tax-equivalent yield of ). If a taxable bond pays less than , the muni is the better choice. How to Buy : Allow you to invest in a diversified

: If you live in the state that issued the bond, the interest may also be exempt from state and local taxes. If a taxable bond pays less than ,

: An issuer may "call" or repay the bond early, typically when interest rates drop. This forces you to reinvest your money at a lower rate.

: The muni market is fragmented; it can be difficult to sell a specific bond quickly without a price penalty. Is it Worth it? The "Tax-Equivalent Yield"

: They are generally considered lower risk than corporate bonds, with historically low default rates.