Buying Municipal Bonds For Dummies [ TRUSTED ]

: They are generally considered lower risk than corporate bonds, with historically low default rates.

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

: The primary draw is that interest is typically exempt from federal income tax. : They are generally considered lower risk than

: If you live in the state that issued the bond, the interest may also be exempt from state and local taxes. : The primary draw is that interest is

: They provide a predictable, fixed stream of income, usually paid out twice a year. Common Types of 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