On Sep 7, 5:13 pm, pixel_a_ted <pixel_a_...[at]yahoo.com> wrote:

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I've started to hear rumblings that the world of munis may soon
change. Its purely speclation as to who the courts will side with, but
its a risk nonetheless.

http://quote.bloomberg.com/apps/news...d=absJcbrn_joc

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I should have mentioned that I was talking about municipal bonds. I
ended up putting the money in a Vanguard LT municipal bond fund for my
state.

Thanks.

"pixel_a_ted" <pixel_a_ted[at]yahoo.com> wrote
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You want the higher yield that, most of the time, long-term
investment grade bonds give, right? You should consider the
following before doing so:

1.
How old and how far from retirement are you?

2.
The current yield curve (that is, a graph of current bond
yields vs. maturity date) is highly anomalous at the moment.
Most of the time in the past, the further away maturity is,
the more a bond yields.

3.
The dollar advantage of going out beyond about five years is
so small that many feel the shorter maturity (and so quicker
access) to the bonds is well worth the small loss in dollar
value. For an excellent, historical and easy-to-follow
depiction of this, see the interactive graph at
http://www.smartmoney.com/onebond/in...urve&hpadref=1 .
Here in my late 40s, with a good life expectancy, I do not
go out more than about five to seven years with my bond and
CD positions.

4.
Weigh a bond mutual funds costs against holding several
highly rated individual bonds.

5.
Depending, consider a bond ladder, to give yourself more
flexibility while maximizing yield.

You spoke of picking out "one relatively safe (insured) long
maturity individual bond." Corporate bonds are not generally
insured, to my knowledge. Certificate of Deposits, with some
caveats, are. Can you explain what you mean?
You spoke of

On Aug 31, 6:44 am, pixel_a_ted <pixel_a_...[at]yahoo.com> wrote:
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Two reasons come to mind:

1. To ensure a fixed periodic payment, e.g. for annuities. Also for
zero-coupon bonds, to ensure predetermined income at fixed future
dates.

2. To "lock in" a presumably high interest rate, if your crystal ball
tells you that the total return would be higher than the cumulative
return that you might otherwise receive from shorter-term bonds as
rates change over the same timeframe.

That presumes that we are talking about noncallable fixed-rate bonds.


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You might also consider your need, or not, for liquidity and risk
tolerance of fluctuating the bond fund net asset value.

I would also add a caveat about comparing taxable v. partially or
wholly nontaxable interest rates. But since you said you are looking
at state bond funds, I presume you are also looking at state bonds.

pixel_a_ted wrote:

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Why? Because they believe rates will either be stable or fall from where
they bought the bond or fund. Since I see CDs that yield 5.2% for 5
years, or 5.25% for 10, and don't believe rates will remain this low for
long, I'd not be interested in a 20 or 30 yr bond. That's just my gut.
All my cash is pretty short term.
JOE

Me again. I just wanted to clarify my question. To be a little more
specific, I can buy into a particular long-term bond fund for my state
that's yielding about 4.2% and has an average duration of about 5-6
years. I was just about to do that but then thought about the
alternative of just buying one or maybe two really long bonds that are
yielding about 4.8%. I guess I am basically trying to understand why
someone would buy a 20 or 30 year bond, and whether this might be a
particularly good or bad time to do so.

Thanks again.

I want to diversify my bond holdings with some longer maturities. The
amount I devote to this would be relatively small compared to the
amount I currently have in 1-5 year maturities.

If I were considering "junk" bonds, I certainly would go with a fund
rather than pick one particular junk bond because the risk would be
spread out in the fund. But for non-junk bonds, I could go with a long-
term bond fund or I could pick out one relatively safe (insured) long
maturity individual bond. What are the pros and cons of either
approach?

Thanks.