No. of Recommendations: 0
There are fashions in investments.
A few years ago, munis paid only about 1/2 of 1% less
than taxable corporates, and even for someone in the 28%
tax bracket, the munis made sense. Now the fashion
pendulum has shifted and people have abandoned the
corporates and flocked to munis. As you say, now the
munis don't make sense.
So you buy good quality corporate bonds to save for
your house.
5% or so on treasuries doesn't sound that good, either.
7% on a good corporate sounds much better.
Another item you might have your broker check out is
taxable munis. Sometimes a municipal agency issues a
bond for some revenue purpose that does not qualify for
tax-free status. They may have better credit than a
comparable corporate and pay an equivalent yield.
So over the few years until you are ready to buy your
house, when there is money for a bond, always check out
the municipals, corporates, taxable munis, treasuries
and mortgages--and realize that the pick you made 6 months
ago may not apply today.
Best wishes, Chris
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