Investing in municipal bonds is a good way to preserve capital while generating interest. Municipal bonds hold several tax advantages over corporate bonds. Another advantage that munis have over corporate bonds is a much lower rate of default. Municipal bonds are also relatively liquid, but investors need to be careful of the bid-ask spread.
What are municipal bonds?
Municipal bonds, commonly referred to as "munis," are debt securities issued by states, cities, counties, and other state governmental entities to fund public projects.
Are municipal bonds better than muni bonds?
Bond funds are also more liquid, and their advantages are even stronger in the long run. Finally, remember that municipal bond funds often offer the same tax savings as individual muni bonds. Municipal bonds and bond funds differ in several ways, which is partly why they complement each other well.
