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Annastasia wrote:
My next-door neighbor told me that she and her husband are doing quite well
with their investments because they have moved into municipal bonds. I am
normally late to these kinds of investments, always seeming to arrive after
the boat has left the dock. Is this the case here?
Dear Annastasia:
Probably not... but then again, who can really tell. State and local
governments are bound to take a hit from the lack of federal surplus that is
almost guaranteed as we engage in a global war against terrorism. This could
be made worse by additional stimulus packages offered by our elected officials
in Washington. The budgets of these local entities have been relatively
strong going into the downturn, and if they are not too reliant on federal
funding, the issuance of bonds should be pretty good.
Over the last year, these types of bonds have had returns north of 17%. Many
states have attractive tax exempt offerings that on the short term, will still
get a nice solid return. If you are looking long term, always use a bond
fund. These types of funds are able ot spread the risk over many different
types of credit sectors and will do better because of it.
More questions about Bonds
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