Who Invests in Municipal Bonds?
Municipal Bonds are a great tax shelter for high tax paying investors. The advantage of this investment is that the income earned on the coupon of most municipal bonds is not subject to federal income taxes. That is why municipal bonds are commonly referred to as "tax-frees" or "tax exempt" bonds. The federal legislation that has conferred this tax exemption is found in section 103(a) of the Internal Revenue Code of 1954. In addition, most states do not tax coupon income from municipal bonds issued within their own borders. Therefore, a New York City Bond owned by a New York City resident is exempt from New York City, New York State and Federal income taxes.
Our Portfolio Management Team
Atlantic Financial has an alliance with a full service municipal bond
portfolio management team. These bond portfolio management professionals
create and manage individual municipal bond portfolios to meet the
specific financial objectives of high-taxed investors and their
families. This service is fee-based.
Atlantic Financial sells no in-house products nor do we trade for our own account. Our municipal bond portfolios are managed in a tax-efficient, conservative style that emphasizes the monitoring and controlling of risk. We invest only in highly marketable investment grade credits.
Municipal Bonds Portfolio Selection and Bond Portfolio Examples
For more information about our municipal bond portfolios or to have us
answer any questions you may have
please call or email us (please be sure to include your name and phone number in your email),
or contact us
Tax sensitive investing may not provide as high a return as other investments before consideration of federal income tax consequences. b)
Bonds contain interest rate risk (as interest rates rise bond prices usually fall); the risk of ssuer default; and inflation risk. The municipal market is volatile and can be significantly affected by adverse tax, legislative, or political changes and the financial condition of the issuers of municipal securities. Interest rate increases can cause the price of a debt security to decrease. A portion of the dividends you receive may be subject to federal, state, or local income tax or may be subject to the federal alternative minimum tax. A portion of the funds income may be subject to state taxes, local taxes and the federal alternative minimum tax.
Bonds - Lending your Money
Bonds. When you buy bonds, you are lending money to a federal or state
agency, municipality or other issuer, such as a corporation. A bond is like an
IOU. The issuer promises to pay a stated rate of interest during the life of the
bond and repay the entire face value when the bond comes due, or reaches
maturity. The interest a bond pays is based primarily on the credit quality of
the issuer and current interest rates. Firms like Moody's Investor Service and
Standard & Poor's rate bonds. With corporate bonds, the company's bond rating is
based on its financial picture. The rating for municipal bonds is based on the
creditworthiness of the governmental or other public entity that issues it.
Issuers with the greatest likelihood of paying back the money have the highest
ratings, and their bonds will pay an investor a lower interest rate. Remember,
the lower the risk, the lower the expected return.
A bond may be sold at face value (called par) or at a premium or discount. For example, when prevailing interest rates are lower than the bond's stated rate, the selling price of the bond rises above its face value. It is sold at a premium. Conversely, when prevailing interest rates are higher than the bond's stated rate, the selling price of the bond is discounted below face value. When bonds are purchased, they may be held to maturity or traded.
Treasury bonds, bills and notes. The bonds the U.S. Treasury issues are sold to pay for an array of government activities and are backed by the full faith and credit of the federal government. Treasury bonds are securities with terms of more than 10 years. Interest is paid semiannually. The U.S. government also issues securities known as Treasury bills and notes. Treasury bills are short-term securities with maturities of three months, six months or one year. They are sold at a discount from their face value, and the difference between the cost and what you are paid at maturity is the interest you earn. Treasury notes are interest-bearing securities with maturities ranging from two to 10 years. Interest payments are made every six months. Inflation-indexed securities offer investors a chance to buy a security that keeps pace with inflation. Interest is paid on the inflation-adjusted principal.
Bonds, bills and notes are sold in increments of $1,000.