What are Bonds? They are a stake of ownership in a company of a municipality’s debt.

Bonds should be laddered in maturity. Laddered means spreading the bonds maturities over a certain period of time, based on the yield curve. If you have $1,000,000 to invest in bonds you may purchase a $100,000 bond maturing yearly starting in year 3 and ending in year 12. This will allow you to handle fluctuations in bond yields. Based on a client’s tax bracket and the type of account, we’ll help you decide if municipal or corporate bonds are appropriate. We only purchase investments grade bonds, (Insured, AAA, AA, A & BBB+).

Municipal Bonds

Municipal or Muni bond payments are normally tax free which are appropriate for people in higher tax brackets. They are not appropriate to be inside of retirement accounts because the investment is tax free and all investments inside of a retirement account grow tax deferred. I normally buy insured municipal bonds.

Corporate Bonds

Corporate bond payments are taxable. These are appropriate for retirement accounts and for clients in lower tax brackets. I often purchase corporate bonds with a survivorship option for older clients. This allows the survivor to receive par value for the bond upon the death of the owner regardless of the current market value.