Muni bond funds vs. individual bonds
What are the pros and cons of muni investment using mutual funds vs. individual issues?
We invariably prefer individual bonds over municipal bond funds if an investor has the wherewithal to provide adequate diversification.
A bond fund has no maturity date, which means there is no promise to return principal as there is with individual bonds.
Individual bonds have a fixed income rate, which is unaffected by declining interest rates.
Open end muni funds can reduce dividend payments in a declining interest rate environment.
Additionally, individual bonds have no ongoing fees, as do most bond funds.
A bond fund has no maturity date, which means there is no promise to return principal as there is with individual bonds.
Individual bonds have a fixed income rate, which is unaffected by declining interest rates.
Open end muni funds can reduce dividend payments in a declining interest rate environment.
Additionally, individual bonds have no ongoing fees, as do most bond funds.