I trust you enjoyed our post last week on mortgage backed securities. At the moment we’re a little over halfway through our series on the wide world of investing. So far, we’ve focused on covering those types of investment opportunities that are too often overlooked by those who deal in stocks, or are concerned too complex or risky for the amateur to get involved with. Hopefully, we’ve been able to demonstrate that that’s not always the case.
Municipal Institutions And Bonds
This time we’ll discuss the ever popular municipal bond. Municipal bonds are essentially an investment that involves you loaning money to a municipal institution, from one of the many levels of government. In order to draw in money to engage in their necessary ventures, many municipal organizations sell municipal bonds, with the intent to pay them back later, after having received profit from the venture in question.
Municipal bonds are very popular among investors because they allow for a unique opportunity to make investments that are very often free from taxation. Most are free from federal taxes, and as if that wasn’t draw enough in and of itself, the majority have no liability towards state taxes either. Essentially, any income you make off of a municipal bond is tax free.
Low Risk Investing
Municipal bonds are another form of investment where the main purpose is to establish a continuous income of sorts rather than to accrue a lot of money all at once in a lump sum burst.
There is a very minimal risk involved with buying and profiting from municipal bonds. Basically the only way to lose your investment is if the municipal organization in question goes belly up. This happens very, very rarely. However, it pays to learn a little bit about the organizations you’re dealing with. Whereas big city municipal organizations might sell more expensive bonds, they’re also much more likely to stick around for the long term, allowing you to profit with greater confidence.
See you next week for part 11 of Investments.
Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 – 2009
{ 3 comments… read them below or add one }
Hi Sean,
I’ve never heard of buying municipal bonds either. They seem like a really low risk investment and the money you make is tax free. It sounds like a pretty good deal to me.
What constitutes a municipal institution? Do you buy these bonds in the same way you buy regular stocks?
Hi Jazz
A municipality is like an administration center and is governed by a Mayor and then a City Council.
I would imagine you would buy these through a stock market broker.
I like the sound of municipal bonds, they still derive an income and I would imagine they would be backing safe company investments.
I also like the fact that they may be tax free.