Corporate and Municipal Bonds
Many investors turn to bonds that offer a slow and steady way to store money for those on a fixed income. Although they don’t carry the same potential for growth as stock, they can generate a steady income stream without the high risk and can help your investments maintain their value in a financial downturn. However, corporate bonds and municipal bonds are not created equal, and we can explain the differences in more detail, but for now, here are the basics:
A corporate bond is a debt instrument issued by a corporation; the bond is always taxed, but typically offers higher yields in return. A corporation might issue bonds in order to raise money for capital improvements and investments.
A municipal bond is a bond issued by a city, town or state to raise money for public projects that provides certain tax exemptions. As in the case with corporate bonds, you can make money from municipal bonds by collecting regular interest payments. The difference is that those payments will never be subject to taxes at the federal level, and if you buy bonds issued by your home state, you can also avoid paying state or local taxes as well.
US Treasury Notes
For those on a fixed income, buying US Treasury notes that have a relatively low return rate is another low risk short-term investment option. Basically, an investor purchases notes from the federal government and earns interest payments every six months until a predetermined maturity date is established; at that time you can cash out the note. There are varied maturity dates and your notes can be bought directly or invested in a mutual fund.
We can help you manage this short-term investment with the maturity date and plan that is best for you, while preventing risk to your fixed income.
Certificate of Deposit
If you are on a fixed income and looking for a low-risk, low-return place to stash your investment, we can help you set up a certificate of deposit. CDs are like bonds, offered by banks and credit unions that have maturity dates. Your money will grow at higher rates than just a regular savings account, depending on your choice of a compounding period of daily, monthly, quarterly or yearly investments.
With varied maturity dates, and fluctuating interest rates, we can help you choose a plan that earns you the most without strapping you while you wait for your return. Come in and let’s talk about our low-risk ways to supplement your fixed income.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. CDs are FDIC insured to specific limits and offer a fixed rate of return if held to maturity, whereas investing in securities is subject to market risk including loss of principal.