January 15, 2015
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Muni bonds have been looking good for a long time. But I had no experience in this area and kept dithering around. We should have bought munis starting a year ago when they were cheap.
After doing some research. we started to get in. On December 1 I suggested a muni holdingppclick here to see it.
Now I suggest you look at another holding: GBAB Guggenheim Build America Bonds Managed Duration Trust which invests in municipal bonds, specifically Build America Bonds. We are looking at a 7.4% yield.
Keep in mind this is a leveraged trust which automatically places it in our Going to Vegas high risk category…..a small position is recommended. Keep in mind that if and when interest rates start heading higher (which may be next year) we will have to look at selling this position as higher rates could hurt us.
CAUTION: This position, like a lot of our holdings, are interest rate sensitive. You may need to sell them if interest rates rise.
Generally speaking we I do NOT like buying bond funds….altho we do currently own a few.
Having said that I want to buy a little of GBAB to see how it acts. (As a general rule I always recommend buying Individual Bonds, and holding them to maturity.)
Here is a link to an article which gives you an excellent overview of this sector:
Guggenheim Build America Bonds Managed Duration Trust (the “Trust”) is a diversified, closed-end management investment company. The Trust’s primary investment objective is to provide current income with a secondary objective of long-term capital appreciation. The Trust cannot ensure investors that it will achieve its investment objectives.
The Trust seeks to achieve its investment objectives by investing primarily in a diversified portfolio of taxable municipal securities known as “Build America Bonds” (or “BABs”). Under normal market conditions:
• The Trust will invest at least 80% of its Managed Assets in BABs.
• The Trust may invest up to 20% of its Managed Assets in securities other than BABs, including taxable municipal securities that do not qualify for federal subsidy payments under the American Reinvestment and Recovery Act, municipal securities the interest income from which is exempt from regular federal income tax (sometimes referred to as “tax-exempt municipal securities”), asset-backed securities (“ABS”), senior loans and other income producing securities.
• The Trust will not invest more than 25% of its Managed Assets in municipal securities in any one state of origin.
• The Trust will not invest more than 15% of its Managed Assets in municipal securities that, at the time of investment, are illiquid.
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