investing in municipal bond funds
Is this a good time to invest in a Municipal Bond Closed End Fund?
Terry Says
Like all bonds, munis follow the same principle: When interest rates rise, bond prices fall.
So if you think rates will fall in the years ahead, this would be a good time to buy.
With a “closed end fund” (ie, one that is not actively managed, but just a fixed pool of bonds), the fund price itself my be at a “premium” or “discount” to the intrinsic value of the bonds inside. Make sure you take this into account. When a lot of people want to buy, the premium can grow. I’d avoid buying a closed end fund that is trading at more than a 7% premium to the bonds inside.