When purchasing municipal bonds, taxpayers lend money to the government to finance projects and construct public works. Muni bonds are common investments because they are comparatively stable and can help investors save on taxes.

What are municipal bonds?

Municipal bonds are debt bonds. When a municipality needs capital for a particular reason, such as an infrastructure project, long-term commitment or general financial and cash flow management, a bond can be issued.

Should you consider muni bonds?

Investors have been pumping money into city bond funds. As for every investment, it is necessary to consider the pros and cons of municipal bonds before diving in.

Types of municipal bond

1. General obligation bond

2. Revenue bond

3. Assessment bond

Advantages of municipal bonds

1. Tax minimization

2. Diversification

3. Safety

Disadvantages of municipal bonds

The biggest drawback to bonds is that relative to shares, gold and real estate, the interest rate that they produce is much smaller. That's why people who want to double/triple their wealth with decent investing don't put their money in shares.

How to invest in municipal bonds

Municipal bonds should be bought from a securities broker. Few brokers specialize in shares, but any stockbroker may still make transactions. Transaction costs for purchasing a municipal bond from a broker are usually between 0.5% and 3% of the purchase price.

Conclusion:

In reality, a municipal bond is a loan. You're borrowing money from the Government, and the Municipality is offering to pay you back on the terms of the loan. There are also drawbacks where there are benefits of anything.

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