CONTRIBUTORS
Rick Polsinello, CIMA®
Senior Market Strategist,
Franklin Templeton Institute
Lukasz Labedzki, CFA
Senior Analyst
Franklin Templeton Institute
Key takeaways
We believe that the current market conditions are favorable for tax-free municipal bonds, and that their characteristics warrant a place in most retail investors’ investment portfolios.
- Municipal bonds offer the appeal of relatively high tax-exempt income.
- This subsector of fixed income historically has also offered high-credit quality relative to other sectors.
- Muni bonds can act as an important diversifier for equity allocations.
Read the full paper to explore these themes as well as recent issuance trends in the municipals sector.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal.
The allocation of assets among different strategies, asset classes and investments may not prove beneficial or produce the desired results.
An investor may be subject to the federal Alternative Minimum Tax, and state and local taxes may apply.
Fixed income securities involve interest rate, credit, inflation and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed income securities falls.
Low-rated, high-yield bonds are subject to greater price volatility, illiquidity and possibility of default.
To the extent the portfolio invests in a concentration of certain securities, regions or industries, it is subject to increased volatility.