Because munis are tax-free, they usually offer lower interest rates than taxable bonds. To see if they are a better deal, use the formula provided by Dummies : Find your Reciprocal : Calculate : Example: A muni for someone in a tax bracket has a tax-equivalent yield of ). If a taxable bond pays less than , the muni is the better choice. How to Buy
: Backed by the "full faith and credit" of the issuer, including their power to tax residents. These are often viewed as the safest munis. buying municipal bonds for dummies
: The primary draw is that interest is typically exempt from federal income tax. Because munis are tax-free, they usually offer lower
: Require a brokerage account. They often have high minimums (typically per bond) and require significant research. How to Buy : Backed by the "full
: They provide a predictable, fixed stream of income, usually paid out twice a year. Common Types of Municipal Bonds
: Allow you to invest in a diversified pool of munis for a much lower minimum (as little as
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