Simple Investment

Since I promised short and to the point messages on this blog, today’s idea is simple, direct and seldom used by the public. Investments in the market these days can be way too dangerous and complicated for even the most experienced investor to sort out all of the many pitfalls of the markets. While we are trying to settle in as to what the so–called Economic Stimulus Package will mean to the average person and how it will affect the various markets.

Well, here is an easy one. Municipal bonds have been around forever, but have you ever owned one? My idea is just a little different, and requires you to understand what you are buying. Your broker probably has access to them and will be quick to tell you what you should buy, but I doubt he will have what I am suggesting.

Basically, a municipal bond (a muni) is a debt insturment issued by one of the many government entities below the federal government, such as a state, city, county, schools, water or sewer districts, and many others. The interest they pay is usually semi-annual, and best of all, most are tax-free from Federal income tax, and in most cases from state income taxes in the state where they are issued. The ones I am looking for are NOT insured, (It just adds to your cost) and are issued by smaller counties, school districts, and towns that meet my criteria!

I like bonds issued in Kansas, Nebraska, Iowa, North and South Dakota, usually by borrowers that don’t default, they just pay! My favorite all time bond was issued by a small Mennonite college to finance a dormitory. I don’t belong to that church, but from long experience, I know that by their faith, they don’t default on their promises. The numbers regarding tax collections, overall bonded debt,and other information the borrower needs to examine are made available by the bond house underwriting the issue.

Because of the lack of insurance, they pay a bit higher interest than average, but the reasons I love these bonds, is that they pay! And on time! Farming and rural communities are doing very well these days, and they don’t like debt, hence they pay off on time.

The major players don’t like them because they are too small for them to make big commissions. so you have to do your homework on finding a broker. Look in the yellow pages or the internet for municipal broker-dealers in Wichita or Topeka, Kansas, Fargo, N.D., Souix Falls, S.D.or Des Moines. It takes a bit of research, but you will find some good people who will not try to force junk on you, and may well not be able to come up with anything, but they will have your name when the time comes.

Many of these dealers also sell Industrial Revenue Bonds (IRBs) so be careful, this is NOT what I am writing about.

There is a lot more information, but this might help you get started.