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Going long with no worries

Q

Your message (“The No. 1 Sin of Muni Investing“) is right on. My friends always ask me why I hold long paper. I tell them I have consistent returns of 5.00% and no worries.

S.D., Florida

A

James A. Klotz responds:

As you know, we have always encouraged municipal bond investors to buy long-term bonds to maximize their income and avoid the flawed strategy of laddering.

Investors with shorter-term laddered portfolios have experienced the frustration of continually being forced to reinvest at lower and lower rates for the last few decades. As a result, they have sacrificed 40% to 50% of available tax-free income on each purchase. Also lost are the additional dollars available for reinvestment.

I trust that a quick glance at your portfolio will change your friends’ approach to muni investing.

Dec 30, 2014

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