You’re confusing after tax and tax equivalent.
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Yes the equivalent. If you get 5% tax free, it’s the equivalent of getting 7.5% taxable.
Nonetheless the thread has run its course with the same continual themes.
Prevailing interest rates are in large part driven by inflation. When inflation rises rates tend to go up.
Not caring about owning lower yielding bonds in a rising inflation (rising yields) environment means your income won’t keep pace with your expenses.
Creating an income stream and ignoring its purchasing power is down right foolish.
Not caring is not a sensible way to approach financial planning.
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The main difference is you can find individual bonds with a definite maturity date which you cant do when you buy a bond fund. That’s why some people prefer to purchase individual bonds and hold them to maturity avoiding potential principal loss (assuming it doesnt default).
The downsides of individual munis are the buy/ask spreads and the lack of liquid market compared to bond funds.
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For fun, I dabble in picking individual equities vs just holding mutual funds/ETFs. My FA also runs different packaged portfolio’s so that his clients have the diversification of a mutual fund(s), but since we own individual stocks, he can be more efficient in offsetting gains and losses when realizing investments.
I never “dabble” in bonds. In the past, my FA would ladder individual bonds to generate income/cashflow but given the prolonged period over which interest rates were at near 0, I have very little fixed income products. Every once in a while, he will suggest a bond because he thinks there is a misprice because of some protective term or credit enhancement that he doesn’t feel has been priced in.
I would disagree that owning individual bonds are always a better way to go than bond funds. Yes, if you hold a bond to maturity, you will get back the face amount absent a default. But if you tried to sell that bond at any time for liquidity or alternate investment purposes, you will be subject to movements in price based on prevailing interest rates and risk (and remaining term of the bond). So yes, you can hold a $100 bond to maturity that pays a 5% coupon and get your $100 back at maturity, but as an asset, in general, it is worth less if interest rates go up and more if they go down.
Bond funds buy and sell and take losses and have fees. That’s how losses happen.
When I don’t say I care about the rate / inflation time - it’s because I’m buying a fixed payment. If prices fall and yields rise, then my next purchase will be better. Or if the opposite happens, worse.
I find it very prudent and many ‘experts’ suggest that exact thing.
I kind of meant to change my investments back in early January but I didn’t. I haven’t bought or sold anything, yet. I keep debating about what I should do, as a 63 YO retiree with a (smallish) pension and no need for the money in my tax advantaged accounts for at least 5 years.
And most college consultants avoid making financial suggestions or recommendations to their clients because they can have tax implications, and the college consultants are not licensed or certified to Provide that kind of advice.
Like many things, it depends. Liquidity concerns - bond funds win.
I buy individual munis because I want to control my duration and the types of bonds that are in my portfolio.
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Agree, depends on what you are trying to accomplish. Should have added “always”. Edited prior post.
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I also own a portfolio of individual munis (I typically buy only primary) but it is a relatively small portion of a well diversified portfolio of assets and asset classes based on my over all net worth and tax position.
I am keenly aware however of all the risks and approach these purchases with my eyes wide open.
New Issues can be great but they can be a pain when they’re over-subscribed and get repriced and you’re on a plane and have a very short window to decide whethere to keep them or not.
If I buy a really attractive new issue, I prepare myself that it’ll get repriced and have my alerts on!
Correct. But they are still fixed income and subject to interest rate risk. Holding individual bonds in a ladder just help manage that risk better.
Munis are great in taxable accounts for high marginal tax bracket folks. But don’t forget, tax-exempt interest can be added back to the MAGI calc for IRMAA.
I have a guy😀. I can directly access.
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Ill deal with that later when I get closer to 63.
Im still trying to get my younger daughter to college next year.
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Some can directly access initial bonds and yet many recent issues can be bought for under the originally offered price - no different than a stock IPO.
Unrelated here’s a perspective on the current muni opportunity.
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So let’s pivot to car maintenance. Who here uses dealers for routine maintenance?
I have had several experiences where the dealers have proven themselves to be outright crooks once I compared their prices to my local trusted mechanic. Anyone else have this experience?
For those in retirement the cost of keeping large ticket items maintained is relevant so figured we could move on from municipal bonds.
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When we were planning my retirement, we did keep our car situation in the mix. I got a new car the year after I retired. I had that car until last year when the oil was disappearing for the second time (old timers here know my story…engine replaced at 60,000 miles).
I get all of my service done at the dealership where I bought the cars. This latest car has free maintenance for 40,000 miles. But even when that ends, I will continue to go to the dealer.
I actually like the service folks where I go!
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Posting this seemingly relevant to the topic article… To lighten up the mood of the thread 
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