For Dummies | Buying Municipal Bonds

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

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

: Allow you to invest in a diversified pool of munis for a much lower minimum (as little as Because munis are tax-free, they usually offer lower

: When market interest rates rise, the value of existing bonds falls. If you sell before maturity, you could lose money. How to Buy : They provide a predictable,

: Over long periods, the purchasing power of your fixed interest payments may be eroded by rising prices.

: Backed by the "full faith and credit" of the issuer, including their power to tax residents. These are often viewed as the safest munis.