Municipal Bonds: Should You Build a Portfolio or Invest in a Fund?

Denver Business Journal - by Richard Todd

A prominent economist recommended that high-net-worth investors should never buy municipal bond mutual funds and instead should ladder their own bond portfolios.  (“Laddering” means having a portfolio of investments with holdings that range from short maturities to long ones.)

He argued that owning individual bonds until maturity offers the certainty of regular income payments, without management fees or expense ratios.

Investors should have learned this lesson in the past year: Portfolios’ downside risk should be quantified and carefully considered.  For high-net-worth investors, municipal bonds can be an ideal strategy to reduce portfolio volatility.  However, the approach to implementing and managing a municipal portfolio is an important consideration.

Is the economist correct?

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