: 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 primary draw is that interest is typically exempt from federal income tax. 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 : An issuer may "call" or repay the
: Require a brokerage account. They often have high minimums (typically per bond) and require significant research. Because munis are tax-free, they usually offer lower
: 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