Alan Appelbaum has provided high-quality financial and investment advice to many clients over the years, working to help build their portfolios and improve their savings. Municipal bonds are one of the biggest suggestions he’s made to people over the years. If you’re new to this type of investment and need help figuring out where to start, his suggestions can help make this process much more manageable.
Alan Appelbaum Examines the Best Way to Value Municipal Bonds
Alan Appelbaum suggests municipal bonds for investors because they can provide a consistent amount of income once the bond matures and provide you with a surprising amount of value. For example, you typically get at least twice a year as long as you hold your bond, which can include 4-10 percent payments, based on the quality of the bonds and who issued it to you.
Municipal bonds are also exempt from federal taxes, which helps make them a fantastic option for many investors. Even better, if you find them from territories instead of states, they may be further insulated from taxes. Buying bonds from your home state is also tax-exempt, which is something to consider when buying high-quality bonds for a long-term investment.
How exactly do you select the best municipal bonds? Alan Appelbaum suggests checking with options from your home state to ensure you get the tax-exemption benefits you want. These could include investing in bonds to improve your home town or condition, such as repairing a sewage system. Investing locally is always rewarding when you try to find outstanding municipal bonds.
Next, knowing about the three rating systems available for municipal bonds is essential. These include Standard & Poor’s (S&P), Moody’s, and Fitch. The first and third versions use a rating system that gauges bonds on a scale from AAA to D. Moody’s uses a slightly different system that goes from AAA to C. You typically want to find AAA options whenever possible. Check ratings from all three groups to ensure you see an option that works best for your needs.
These ratings indicate how likely a bond is to pay, as not all pay the same as others. Alan Appelbaum says the three rating groups are about the same in their reliability, which varies depending on your research. For instance, you may find that one bond rates AAA on two sites and a B on another. You can feel comfortable with the quality of this bond.
However, you need to know that any bonds below BBB are usually considered junk. These are high-yield bonds that come with a high degree of risk. Investing in these puts your finances at slightly more risk than investing in higher-ranked options. That said, they can pay out at a higher level if they mature quickly, which makes creating a balanced profile essential for investors.