I was very pleased to stumble across your Web site and find a firm that supports my investment strategy. I therefore trust your answers to some questions that I have (and believe me, that says a lot). My family has invested in municipal bonds for generations and I have followed suit. I am currently managing my portfolio exactly as my father and grandfather do, but I have some questions that I would like you to answer because their answers are simply that it’s “the way we’ve always done it.”
First, I only buy long-term premium munis for the highest Yield to Call/Yield to Maturity that I can find, exactly as you suggest. I normally wait for the interest to build to a certain amount before I buy another bond. I do this because I can get a better price by buying a bigger chunk of bonds. It takes a few months to get to this point, and I sit on the cash in the meantime. (It’s actually in a type of money-market account.) If I don’t need all of the income to live off of, how would you suggest investing it until I have enough to buy another bond?
Second, I currently live in Washington, D.C., where my munis from all over the country are triple exempt. If I decide to move to New York for a few years with the intention of returning to D.C., what would you recommend doing? I obviously don’t want to liquidate my holdings and reinvest them in N.Y. bonds because, for one, I would get hosed on the bid/ask spread. Should I just weather the few years and pay the state and local tax? Third and finally, when a muni is pre-refunded, do you recommend selling it?
T.B., Washington, D.C.