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Municipal Bond Forum
FMSbonds, Inc.'s Bond Forum™ is an exclusive opportunity for investors to submit questions and comments on the bond market or to respond to one of our articles.
To participate, just send us an e-mail. Be sure to include your name or initials and your state of residence. Posted e-mails may be edited for length and clarity. If you prefer a private response, please note that in your e-mail. Responses are provided by James A. Klotz, president and co-founder of FMSbonds, Inc., a municipal bond specialist for more than 35 years; Dr. Jay H. Abrams, chief municipal credit analyst; and other members of the firm as noted.
Postings are listed by date. You may also view postings by topic using the search box below. If you have any questions, please call us at 1-800-FMS-BOND (367-2663) or e-mail us.
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Wondering whether to wait
1/19/2012I appreciate your article, "Man Bites Dog, Almost." I have about $4 million already invested in muni bonds and another $1.5 million in cash that I have been afraid to invest in bonds. I have about $500,000 in stocks, which haven't done much in the past few years. Should I wait for interest rates to go up? I am 58 and near retirement.
- J.M., CaliforniaAs we mentioned in the commentary to which you refer, the conventional wisdom advising investors to wait for interest rates to rise is a fatally flawed strategy.
Here is a past article regarding this concept that will also be helpful: Time Flew, But Interest Rates Didn't .
Not manna from heaven, but still a good deal
1/19/2012The returns you referred to in your article, "Man Bites Dog, Almost," can only be achieved by bond traders churning their portfolios. If you buy and hold munis, you will get about 5% to 6% tax free. Still a good deal, but not exactly manna from heaven. Please tell me if I have missed something.
- J.T., CaliforniaYou haven't missed a thing. Your comments are right on the money and coincide completely with our philosophy for municipal bond investing.
Upending conventional wisdom
1/19/2012Can you please explain the bond return figures you quote glowingly in your commentary, "Man Bites Dog, Almost"? If you buy and hold a 4% bond to maturity, it returns 4%, etc. If I have to pay a premium for it, I realize even less. Am I missing something here in understanding my bond investments, or are you speaking in your article of people who trade bonds?
- A.F., New JerseyWhen analytical services compute the performance of a fixed-income security, they do so on a "total return" basis. (This analysis assumes a bond is purchased on Jan. 1 of a given year and sold on Dec. 31.)
Obviously, neither you nor we adhere to this practice.
Actually, we were not speaking glowingly of these returns. We were quoting outside informational organizations and pointing out that bonds outperforming stocks flies in the face of widely held, though faulty, beliefs.
By the way, even if you pay a premium for a bond, you receive the full yield-to-maturity quoted on your confirmation.
This report is produced solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. This report is based on information obtained from sources believed to be reliable but no independent verification has been made, nor is its accuracy or completeness guaranteed.