The Benefits of Investing in Municipal Bonds
There are numerous benefits to investors who place a portion of their portfolios in bonds.
Municipal Bonds can provide a great tax shelter for investors in high tax brackets.
The advantage of most municipal bonds, or munis, is that the interest
is not subject to federal income taxes. That is
why municipal bonds are commonly referred to as "tax-frees" or "tax
exempt" bonds.
In addition, most states do not tax income from municipal
bonds issued within their own borders. For example, a New York City Bond
owned by a New York City resident is exempt from New York City, New York
State and Federal income taxes.
Our Portfolio Management Team
Atlantic Financial has an alliance with a full service municipal bond
portfolio management team. These bond portfolio managers offer a fee-based service in
creating and managing individual municipal bond portfolios, and meeting the
specific financial objectives of high-taxed investors and their
families.
Atlantic Financial sells no in-house products nor do we trade for our
own account. Our municipal bond portfolios are managed in a
tax-efficient, conservative style that emphasizes the monitoring and
controlling of risk. Atlantic Financial invests only in highly marketable investment
grade credits.
For More Information on Bond Portfolios, please visit the links below:
Municipal Bonds Portfolio Selection
and
Bond
Portfolio Examples
For more information about our municipal bond portfolios or for any additional
questions
please call Atlantic Financial at: 1-800-559-2900, email us
(please be sure to include your name and phone number in your email).
Municipal Bonds FAQ
| Tax-Table /
Credit Ratings Table |
Portfolio Real Life Examples
Disclosures
Tax free investing may not provide as high
of a return as other some other investment alternatives.
Bonds do contain interest rate risk
(for example, as interest rates rise, bond prices generally fall); bonda also contain the risk of issuer
default as well as possible inflation risk. The municipal bond market can be volatile and
can be significantly affected by adverse tax, legislative, or
political changes, as well as the financial condition of the issuers of the particular
municipal securities. Interest rate increases could also cause the price of
a debt security to decrease. A portion of the dividends an investor receives
may be subject to federal, state, or local income tax, or may be
subject to the federal alternative minimum tax. A portion of the
income received may be subject to state and / or taxes as well as the
federal alternative minimum tax.
Bonds - Making Money By Lending Your Money
Bonds. When an investor buy bonds, they are essentially lending money to a federal or state
agency, a municipality, or other issuer, such as a corporation. A bond is like an
IOU. The issuer of the bond promises to pay a stated rate of interest during the life of the
bond and promises to repay the entire face value when the bond comes due, or reaches
maturity. The interest rate that a bond pays is based primarily on the credit quality of
the issuer as well as current interest rates. Firms like Moody's Investor Service and
Standard & Poor's are rating agencies that rate bonds based on a number of differnet factors. With corporate bonds, for example, the company's bond rating is
based on the company's overall financial picture. Likewise, the rating for municipal bonds is based on the
creditworthiness of the particular governmental or other public entity that issues the bond.
Issuers with the greatest likelihood of paying back the money have the highest
ratings, and their bonds will pay an investor a lower interest rate. Remember,
the lower the risk, the lower the expected return.
A bond may either be sold at face value (called par,)at a premium, or at a discount. For
example, when prevailing interest rates are lower than the bond's stated interest rate,
the selling price of the bond rises above its face value. It is then considered to be sold at a
premium. Conversely, when prevailing interest rates are higher than the bond's
stated rate, the selling price of the bond is discounted below face value. Therefore, the bond is considered to be sold at a discount. When
bonds are purchased, they may either be held to maturity or traded and sold prior to their maturity date.
What are Treasury bonds, bills and notes. Bonds of the U.S. Treasury issues are
sold to pay for an array of government activities. The issues, known as Treasury bonds, bills, or notes, are backed by the full
faith and credit of the federal government. There is a difference, however, between bonds, bills, and notes. Treasury bonds are securities with
terms of more than 10 years. Interest on Treasury bonds, or T-bonds, is paid semiannually. In addition to T-bonds, the U.S. government
also issues securities known as Treasury bills and Treasury notes. Treasury bills are
shorter-term securities, having maturities of three months, six months or one year.
These issues are sold at a discount from their face value, and the difference between
the cost and what an investor is paid at maturity is the interest that they earn. Treasury
notes are interest-bearing securities with maturities ranging from two to ten
years. Interest payments on T-notes are made every six months. These inflation-indexed securities
offer investors a chance to buy a security that keeps pace with inflation.
Interest is then paid on the inflation-adjusted principal.
Bonds, bills and notes are sold in increments of $1,000.
