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Considering Bonds? A Review of the August Municipal Market Commentary

In last month’s Municipal Market Commentary, I took a look at some questions that individual investors might be asking themselves and their financial counselors about maintaining and adding bonds to their portfolios in today’s market. The issue is particularly relevant right now, at a time when many market analysts believe we’re in for rising interest rates. The way that interest rates impact bonds, as highlighted in my A Look at Premium Bonds blog post from last week, is that prices typically fall when interest rates rise and prices will generally rise when interest rates fall.

Below is a summary of considerations I shared in that commentary:

1) Keeping bonds that are already in a portfolio

Bonds help provide income and, in the case of municipal bonds, tax-free income. Some considerations before making a decision to sell or continue to hold these bonds are:

  • Can the income generated by those holdings be replaced?
  • Does selling make sense in the current market, which is still at historically low interest rate levels?

2) Adding bonds to a portfolio

Meanwhile, investors that are considering if and when it’s the right time to purchase new bonds for their portfolio might want to consider:

  • Is trying to time the market causing you to miss out on potential tax-free income?
  • Is there an opportunity to pursue quality bonds offering the best return available to move your returns up from nearly 0%?

Learn more by chatting with your financial advisor about how bonds may work within your portfolio. It’s important to keep in mind that investing in bonds is just like any other kind of investment in that it involves risk, including a potential loss of principal. Income may be subject to state, local or federal alternative minimum tax.

The information provided is not an invitation to invest in any products or services or otherwise deal in any of these or enter into a contract with Hennion & Walsh or any other company. The information provided should not be relied upon in connection with any investment decision. You should not act upon any information contained herein without first consulting a suitably qualified financial or other professional advisor.