Historically, bonds have always acted as a kind of ballast for portfolios. During market crashes like those in 2008 and March 2020, bonds, as a safe-haven asset, helped to cushion the blow and protect investors from devastating losses. But bonds aren't just a tool for risk mitigation – they can also provide a steady stream of income for investors seeking higher yields than those offered by traditional savings accounts or CDs.
If you're considering adding bonds to your investment portfolio, there are a few things you should know. First, not all bonds are created equal. Some are risk than others, and some offer higher yields but come with greater potential for loss. Second, taxes can significantly impact your returns, so it's important to understand the tax implications of different types of bonds.
Tax-exempt municipal bonds can be an excellent vehicle for income-seeking investors, particularly those in high tax brackets. These bonds are issued by state and local governments to fund public projects like schools, highways, and water treatment plants. Because the interest income from these bonds is exempt from federal income tax and sometimes state and local taxes as well, they can provide a higher after-tax yield than other types of bonds.
Municipal bonds may not be as exciting as other investments, but they can hold special tax advantages. Consider these municipal bond funds as a way to invest in the asset class.
One of the world's biggest bond managers sees the best opportunity in more than a decade to invest in public-debt securities as the Federal Reserve moves closer to tapering its massive monetary stimulus. The manager predicts that rising interest rates will benefit bond investors, especially those who invest in longer-term bonds.
The VanEck CEF Municipal Income ETF invests based on the S-Network Municipal Bond Closed-End Fund Index. Click here to read my analysis of this fund and why it might be a good choice for income-seeking investors.
In terms of asset classes, equities dominate the realm of environmental, social, and governance (ESG) exchange-traded funds. However, bonds can also be a powerful tool for socially responsible investing. Bond issuers that prioritize sustainability and social responsibility can provide a double benefit to investors: the potential for higher returns and the satisfaction of knowing that your money is being used for good.
Everything you need to know about investing in bond mutual funds, plus the best bond funds to buy now. This comprehensive guide covers the basics of bond investing, including the different types of bonds, how to assess risk and return, and how to build a diversified bond portfolio.
While stocks get most of the attention in the investment world, municipal bonds can play an important role in a diversified portfolio and provide a source of steady income. Municipal bonds are issued by state and local governments to fund public projects, and they offer tax advantages that can make them a smart choice for high-net-worth investors and those seeking tax-efficient income.
Will the 2023 investment picture look like 2022? If not, you'll need to be positioned in the best long-term investments for 2023. Bonds can be a key part of a long-term investment strategy, providing stability and income that can help you weather market volatility and achieve your financial goals.
