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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35397  
Subject: Re: Selling Munis Date: 11/25/2009 11:54 AM
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Hodaq1,

You wrote, I recently inherited a sizable portfolio of muni bonds that I wish to sell. I have already sold some of the bonds through my full service broker (in some cases he bought them and in some cases he sold them to another broker).

Using investinginbonds.com I can see that immediately after I sold the bonds my broker (or another broker) made a lot of money by buying them from me and selling them for a much higher price.

What is the best way to go about selling municipal bonds without getting killed on the transaction?


Is there any way for your broker to sell your bonds via limit orders? I would never assume any broker is going to give me the best price for a bond. The bond market isn't nearly as liquid or transparent as the stock market - which still has problems of its own - and I almost always use limit orders to buy or sell stocks too.

To deal with some of this lack of transparency, it would be best if you could find out the price of recent sales on your bonds (or bonds with similar terms) and try to sell them at that price, rather that just taking what the broker offers you.

At no point would I assume any broker has your best interest at heart. They're trying to make a profit. With bonds, the broker often makes a profit both on transaction costs and on the spread by making a market in the bonds. However if you can sell the bonds at what you feel is a reasonable price, it really doesn't matter how much the broker is able to make by marking up your specific bonds. You got what you wanted, so what he manages to make after that is mostly irrelevant.

Also I'd look into replacing your full-service broker. I've never understood the need for one. Of course I'd also never trust someone else with my money or someone else's investment advice. I've seen my father get burned repeatedly by shysters wanting to help him invest his hard-earned money much of my life. He never did well with any of that. But as his son, I've learned a healthy skepticism of other people's financial motives ... and I'd have a hard time trusting the motives of any "full service" broker.

If I had bonds I inherited that I wanted to sell (for whatever reason), I'd research the going price for them and then offer them for sale at or near that price. The broker is just a middle-man and usually the cheapest broker with reasonable facilities (and access) will suffice.

- Joel
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