Municipal Bond Investing --- The 6% Tax Free Solution

Some investors have been receiving better than 6% tax free, paid in monthly installments for as long as twenty five years. Why haven't you? 

Alliance-Bernstein, BlackRock, & MFS are Tax Free CEF Managers

What if you could invest in selections from a group of 65 tax free municipal bond funds, paying monthly income at an annual rate of roughly 6%? Nearly half of the Closed End Funds studied pay an annual rate above 6.2%.

Why hasn't your investment advisor/accountant/rich uncle told you about these investment opportunities?

A private study (April 2013) examined investment portfolios containing 71 different Municipal CEFs managed by fourteen different major investment organizations. Throwing out the three lowest and three highest yielding CEFs, the remaining 65 boasted an average yield of roughly 6%. 66% of the funds had a yield range from 5.8% to 6.3%.

So Are American Funds, Dreyfus, Eaton Vance, Federated, & Invesco

Of the sixty-five CEFs in the study, not one has missed a monthly dividend payment in an average operational history of around twenty years. Nearly all of the funds sampled are paying more now than they did before the financial crisis; More than 80% of the funds were selling at prices below net asset value at the time of the study.

 And Putnam, DWS, Pioneer, Nuveen, & Pimco

Interestingly, this performance history was accomplished during a time period that included two of the financial world's most notorious melt downs. But perhaps more important (in two ways) is the important role that tax free CEFs play in both retirement and pre-retirement Market Cycle Investment Management (MCIM) portfolios.

All MCIM portfolios have at least 30% invested in income purpose Closed End Funds. So with about a third of the assets producing significant income, and all equity inclusions producing some income, a strong performance "foundation" is always in place and ready for required monthly disbursements. Some refer to it as an annuity-like stream of income without the depletion (or final confiscation) of the assets.

In spite of their enviable track record throughout the dismal decade and beyond, Tax Free CEFs continue to be maligned by many financial advisors and major Wall Street brokerages. The creativity used to deflect investors from these clearly dependable investment products is incredible to say the least. 

"They use leverage; they charge higher fees than you pay with individual  bonds; they are extremely volatile; they are more risky than the $250,000 you have invested in each of your three California Revenue Bonds". Only one of these statements is true... but just what is this thing called leverage?

Without leverage, you would be peddling a bicycle to the office instead of driving a Beemer!

A note about "risk" --- if there is no risk, it's not love, and it's not an investment. Make sure you assess the risks involved, and read the disclaimers you will find on this page. 

The Brilliance of Tax Free Income Closed End Funds

So in spite of the borrowing many CEF managers do use to run their operations (the leverage):

• You can buy and sell CEFs, in whatever quantity you like, for standard brokerage commissions, and in a totally liquid market place. Most funds contain hundreds of issues, nationwide, and with varying maturities, call provisions, and quality ratings. There are no concentrated positions.

• If you were to study the prices carefully over the twenty plus life years of the CEFs in the study, you would find a very narrow trading range both before and after the financial crisis.

• When interest rates rise, as they surely will, CEF holdings can be added to, thus increasing yield and reducing cost basis at the same time. As with individual issues, changes in market value have no impact on the income produced by the securities held in the fund.

So let's see. We get super diversification, excellent liquidity, a steady and historically dependable stream of tax free income, no worries about calls or maturities, lower  (and visible) acquisition costs, the possibility of trading profits, and if we wish, an MCIM manager who will make sure that we have a growing tax free monthly income to fund our retirement program.

If you can tell me why the tax free monthly income will be growing, I'll send you a free copy of "The Brainwashing of The American Investor: The Book That Wall Street Does Not want YOU To Read".

For more information (and a free "Brainwashing" e-book) contact John Dohn

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