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muni and corporate bonds?
Posted on 7/1/14 at 7:02 am
Posted on 7/1/14 at 7:02 am
Anyone use these in their roth. Can someone explain if low rates mean its a good time for corporate bonds. Would call backs be less likely
Posted on 7/1/14 at 8:48 am to ragacamps
If your buying Muni's for the tax free income then you should not be putting it in a tax free account. Your defeating the purpose. Now if your buying them for the safety and want to justify that, then that's understanble.
But, to answer your question. When interest rates go up, the price on the bonds will fall. I think they are necessary for a well diversified portfolio but I would not go long term on bonds.
But, to answer your question. When interest rates go up, the price on the bonds will fall. I think they are necessary for a well diversified portfolio but I would not go long term on bonds.
Posted on 7/1/14 at 8:50 am to Shepherd88
There is absolutely no conceivable reason to have munis in a Roth.
ETA: and low interest rates mean that bonds are more expensive, so no to that as well.
ETA: and low interest rates mean that bonds are more expensive, so no to that as well.
This post was edited on 7/1/14 at 8:52 am
Posted on 7/1/14 at 11:41 am to ragacamps
Bonds rates are low, yes, but rates work inversely with value. If the rates start picking up again, bond values drop.
As others have noted, having a muni in a Roth seems not very smart since Roth gains are tax-free anyway. That said, if you wanted to invest in a muni bond issue that people think is risky a Roth might be the place to do it. Detroit general obligation bonds, for example. If Detroit's bankruptcy works out the bonds could jump hugely. Or you could lose everything. That kind of volatile security is what you want in a Roth.
As others have noted, having a muni in a Roth seems not very smart since Roth gains are tax-free anyway. That said, if you wanted to invest in a muni bond issue that people think is risky a Roth might be the place to do it. Detroit general obligation bonds, for example. If Detroit's bankruptcy works out the bonds could jump hugely. Or you could lose everything. That kind of volatile security is what you want in a Roth.
Posted on 7/3/14 at 8:38 pm to TheHiddenFlask
quote:
There is absolutely no conceivable reason to have munis in a Roth. ETA: and low interest rates mean that bonds are more expensive, so no to that as well.
that's not entirely true. while rare, there have been times in the last few years there when munis had higher yields nominal yields than treasuries of the same maturities. if you are looking for safety and want to get more yield than cash I could see putting some money in short term high quality munis in an IRA.
like I said very rare but conceivable.
Posted on 7/4/14 at 3:42 am to whodatigahbait
quote:
if you are looking for safety and want to get more yield than cash I could see putting some money in short term high quality munis in an IRA.
That's still not a good reason. The interest on a muni is tax-free to start with, it doesn't matter what the rate is.
As I pointed out, there can be one reason, namely if it is a high-risk muni like Detroit's - because if you get lucky and have large capital gains that is not tax-free unless it's in the Roth.
You don't want your safe stuff in the Roth, you want the risky stuff there.
Posted on 7/6/14 at 2:49 pm to TheHiddenFlask
quote:
There is absolutely no conceivable reason to have munis in a Roth.
I disagree. If the Roth is the only place he has deployable cash AND munis become distressed, then I can see doing it. Munis were absolutely in the toilet this time last year and you could have made some great capital gains by scooping them up.
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