A little more than a year after the first signs of mayhem in the municipal bond markets, issuers are still defaulting, and investors are still worried. And while investing professionals would say that in this climate, it’s best to leave your bond research to the experts, that’s not the only way: A little diligence, a free afternoon and an Internet connection is enough to start separating the risky munis from the stable ones.
The goal – to build a portfolio of municipal bonds that reduces risk and supplies steady tax-exempt income – is still possible, says financial advisor Dennis Gibb, president of Sweetwater Investments, an investment advisory firm in Redmond, Wash. By picking issuers whose finances and politics you can track thoroughly, like your local or state government, and investing in bonds backed by recession-proof, essential services, it’s possible to avoid potential blow-ups and ride out the current muni mess. It’s far from easy, says Matt Fabian, research director of Municipal Market Advisors, “but in some cases you can figure things out.”
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