municipal bonds: how are they as an investment nowadays?

Discussion in 'Off-topic' started by fmlaw1, Jan 15, 2011.

  1. fmlaw1

    fmlaw1 Active Member

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    There seem to be many intelligent and common-sense financial folks here. I'd like to hear opinions as to mb and how they would fit into an individual conservative investment scheme.

    NO, I am not trying to get professional investment advice for nothing, as my mb interest is simply recreational at the moment.
     
  2. AEKDB

    AEKDB New Member

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    Interesting topic. I would be concerned about default (probably not likely) and higher than average inflation (likely). We know the fed will try (is trying?) to inflate away the debt. This will not work since most future guarantees are tide to inflation (federal pensions, SS, wages, etc) but, that is a different subject. I would not be surprised if states are counting on increased inflation to reduce the real cost of debt. The states look at munis the way we look at our mortgage.

    Personally, in a period of high inflation (and in every other scenario) I would want to own stocks.

    I quickly found this article which briefly discusses the impact of inflation on bonds, stocks, and commodities: http://money.cnn.com/2006/05/24/pf/portfolio/index.htm.

    This is not professional advise and is probably worth less than you paid for it.
     

  3. NTA

    NTA Well-Known Member

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  4. MrMorden

    MrMorden New Member

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    Sovereign defaults likely makes this the *worst* investment right now.
     
  5. Jonboy

    Jonboy New Member

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    Just send me your money now and I will send you half of it back in 10 years. :D
     
  6. Mr_Z

    Mr_Z Member

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    How about we all just send you $5 now? that will be the equivilant of what happens when the bonds default, the federal govt bails them out, and pins the bill on joe taxpayer.
     
  7. AEKDB

    AEKDB New Member

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    Nobody wants to argue for Bonds? At any age? Even as a small % of a diversified portfolio?


    We could expand the topic to Corporate Bonds. After the stunt pulled by the Obama Administration, I will think twice before buying any corporate debt.
     
  8. BSCLibertarian

    BSCLibertarian I'm kind of a big deal

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    I am certainly no expert but that won't keep me from chiming in.....buying a bond is essentially loaning money to an entity (gov't, corporate, whatever) in the hopes that they will repay you with interest. IMHO borrowing too much is what got us in the mess we are in now (personal borrowing, corporate borrowing etc.). While the likliehood of a municipality or other gov't agency defaulting on their debts is maybe less likely than a private corporation.....what is your ROI? What are they paying? I honestly don't know but if you are considering this for long term (5+ years) I would submit that you could do better in good mutual funds with a long track record (5 +) years.

    http://www.daveramsey.com/articles/arti ... investing/

    To me, a muni bond is similar to a single stock in that you are putting your eggs in one basket. As a very small percentage of your portfolio it would not expose you to too much risk but, again, I don't think you would get the returns (long term) that you could get from good mutual funds.

    YMMV.
     
  9. bdee

    bdee انا باتمان

    I think the most likely short term risk is inflation. It depends on the rate of return versus the anticipated rate of inflation. If you listen to some pressures for inflation would outstrip any return you might get from the bonds.
     
  10. AEKDB

    AEKDB New Member

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    I know Dave is a god to many and who am I to question his preachings. That said; it is interesting how few mutual funds have outperformed the S&P500 over any time period even before adding in fees and expenses.

    Again, this is not advise but just a topic of conversation it is worth less than you paid for it. Please seek the assistance of an investment "expert".
     
  11. BSCLibertarian

    BSCLibertarian I'm kind of a big deal

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    I love how if anyone quotes anyone else people say that person is "a god to many"..... :roll:

    AEKDB, are you suggesting buying single stocks from the S&P 500? For me, single stocks are way too risky.

    So, why not buy an S&P 500 index fund?

    http://www.ehow.com/about_6600306_s_p-f ... funds.html
     
  12. AEKDB

    AEKDB New Member

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    No, not you, I was referencing another thread (https://www.georgiapacking.org/forum/viewtopic.php?f=6&t=11280&p=674934&hilit=ramsey#p674934) where I pointed out that his advise is not the best and was nearly burned at the stake.

    I was pointing out an interesting observation. I am not suggesting you or anyone else do anything except talk to an expert.
     
  13. BSCLibertarian

    BSCLibertarian I'm kind of a big deal

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    That is the best advice! :-D
     
  14. jlcnuke

    jlcnuke New Member

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    I am very active in the management of my 401(k) and regularly trade equities and options in my brokerage account with consistent returns that outpace the market. I own no corporate or municipal bonds and have no plan to buy them. I may pick up some class EE treasuries as an inflation hedged investment for my niece and nephews to help with their college or other expenses I don't expect their parents to be able to pay in the future.

    Historically, bonds (the majority of all kinds) are safer than individual stocks and provide a "virtually guaranteed" roi. That ROI is also historically low and recommended only in the case of needing money to grow but being unable or unwilling to risk any losses on it.

    CD's provide about the same return with lower risk generally (though bonds sometimes do have better returns, if only slightly). If you are looking for low return safe investments to shift your portfolio's risk profile into a less risk tolerant stance I would switch more into CD's or other cash equivalents that are, in general, safer.

    At my age (33 currently) I'm very aggressive in my 401(k) portfolio and my brokerage account trading makes the 401(k) look like a savings account risk wise.

    I also agree that you should talk to a professional financial planner. This does not mean someone with just the title. Make sure they have the appropriate series certifications as well as independent (i.e. not friends/family) references you can get to recommend them.
     
  15. Taurus92

    Taurus92 Well-Known Member

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    If anybody follows ZeroHedge.

    Harbinger Of Muni Bloodbath: Vallejo Offers Unsecured Creditors 5 - 20 Cent Recovery

     
  16. JeF4y

    JeF4y New Member

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    Muni bonds are WELL poised to be the next bubble to burst.

    I considered them a few years back, but avoided and there's no way I'd get into them now...