Munical Bonds can be Revenue or General Obligation. You need to get the General Obligation because these are backed by a Govt ability to tax the people making default virtually impossible as long as their lives people in the municipality to tax.

Now the most important reason on earth to get these bonds. The richest family on earth holding over 500 trillion dollars gets them, yes the Rothschilds.

Do a search on youtube for this title “Evelyn De Rothschild Warning Masses – Too Late (Holding Bonds, Oil, Gold)” and you will see a video from CNBC the most trusted name in news showing Lord Rothschild saying during an interview with Maria Bartiromo that he personally invests only in Tax Free muni bonds.

Also do a search for “the money masters” and you will see just how rich Lord Rothschild is and that the Federal reserve itself buys bonds as a hedge before it lends money to guarentee that the USA Govt has to tax the people to pay them back.

You do not buy these strictly because your in a upper tax bracket. You should buy these to offset your core. Your core is bills that you have from when your younger till older that never go away such as rent and electic.

Forget that nonsense about investing for growth and wait till your retired to do fixed income. I would atleast put 20% in fixed income Triple tax free muni bonds at any time and at least 5000 a year or if your richer 20% of your portfolio untill such time you have your core bills taken care of. This way you take the interest payment that is semi yearly and save it for just one year. Now you divide by 12 and have a monthly tax free income.

Example. 15,000 dollars put in Tax free muni bond paying 8% coupon. You get 1200 a year. Wait to get both 600 dollar twice annual payments totalling 1200 then divide it by twelve. Its like you have a check for 100$ a month for life because you simply reivest the 15000 each year at the 8% You simply buy more bonds each year to hedge against the inflation as your still putting atleast 5,000 dollars every year at minimum no matter what.

Sure you will lose money from interest rate but that 100$ today is money in your pocket backed by the govt that will pay your cellphone bill.

Then you keep the cycle going untill you have enough to pay all your core bills on interest income alone. Core bills are like your rent, electric, gas, water, phone, food. Not your cable, magazine subscribe, fancy restaurant, and credit cards, or other bills you dont need or want to survive on. (you eventually do a 2nd investment core for those fun things)

So the plan is to have tax free income from muni bonds paying 8% and having that to cover your lifes core bill, the bills that will never leave you ever like rent. Even when you own your home free and clear you pay rent. Dont believe it, take your yearly property tax and divide it by 12 and see how fast you pay estimate 425$ a month to live in your home you own, so just get a tax free muni bond to cancel out the 425 and only then are you freed from the financial banking slavery system, and good luck

disclaimer:
The above is not investment advice but rather an a example of why to invest in tax free muni bonds that are guarenteed income backed by the municipalities ability to tax its people.

So if I buy a 100$ municipal bond that matures in 2013 with a 4% rate, I’ll be getting that 4% rate every year until 2013.

So 2009 – 4$, 2010 – 4$, 2011 – 4$, 2012 – 4$, 2013 – 4$ for my 100

That makes sense and is about the standard rate (though better than most right now!) I just wanted to make sure I hadn’t misread before I committed to anything.

It sounds like a good deal though and one I might try.

Couple things I’d emphasize.

AAA/AA rating is the best and people should probably stick to that level. Once you get below AA the risk of defaults starts to go up a lot. B rating or below starts to hit ‘junk’ status and the default rates there are fairly high.

If you’re looking at buying individual bonds then it is important to diversify over multiple bonds from different sources. Even though the risk of a municipality defaulting on a bond is usually very low it can and does happen. So its best to make sure your money is spread around to lessen the exposure to a potential default.

I think it is important to note that individual investors should not be purchasing INDIVIDUAL bonds. Purchasing individual bonds, like purchasing individual stocks, is speculation and not investment.

I’ve read countless articles over the last year of people’s “SAFE” bond investments being wiped out. I wrote a blog on this last week and included a quote from perhaps the most wise investor of the past 100 years – Benjamin Graham.

http://www.twentysomethingsense.com/2009/04/speculating-is-not-investing.html

“An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.”

Buying individual bonds, especially those that are not properly secured, is purely a speculative play and should be avoided.

If one is to include bonds in their asset allocation, which most will, the vehicle should be a bond fund. Vanguard offers several muni bond funds that would be much better suited for the individual investor vs. purchasing individual bonds becaused of the reduction in risk diversifying your money over a fund of bunds offers you with very little impact on your return. An added benefit of these bond funds is their increased liquidity and lower transactional costs vs. an individual bond.