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What to look for – and avoid – in a muni bond broker


We have a “prudent-investor” broker with another firm who put over $1 million into Puerto Rico bonds. We almost “killed” him when we found out what he did. Now we have to watch him very carefully to make small investments and gain a decent return. Any advice? We have about $2 million still invested. We understand a lot depends on the actions of the current government in Puerto Rico, which is very slow to react.

M.G., New York


James A. Klotz responds:

Interesting: You evolved from “almost killing” your broker to “watching him very carefully” – but not to finding a new one.

As our clients and friends know, we consider it imprudent for investors to leave investment decisions regarding their municipal bond investments solely to any broker, even one of our own bond specialists.

Tax-free bonds are easy. Our clients are involved in the selection process, and unless, over time, there is a fundamental change in the security, they employ a buy-and-hold strategy.

Tax-free bonds do not need to be managed, and paying management fees that can dramatically reduce returns is also unnecessary.

Unfortunately, we cannot offer you any advice without being more familiar with your specific situation and longer-term investment objectives.

Keep in mind, Puerto Rico has 18 different issuing entities and no two are alike.

If you would to discuss this further, we would be pleased to offer assistance.

Apr 28, 2017

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    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.