Municipal bonds are debt securities issued by government entities that provide modest returns by way of interest payments over the duration of the bonds. The interest received on a municipal bond is generally exempt from federal tax, and in some cases, state and city tax as well.

What municipal bonds are available for purchase?

Here are nine muni bond funds to buy and hold:

• Vanguard Tax-Exempt Bond ETF (VTEB)
• Baird Short-Term Municipal Bond Fund (BTMIX)
• PIMCO National Municipal Intermediate Value Fund (GNMVX)
• Northern Intermediate Tax-Exempt Fund (NOITX)
• Nuveen Dynamic Municipal Opportunities Fund (NDMO)

Can I buy municipal bonds without a broker?

Trade directly online through a self-managed account. For investors who prefer to buy and sell muni bonds on their own, another option is to do so through a self-managed account, also known as “direct online trading,” which is done without the assistance of a private client broker or RIA.

How much money do I need to invest in municipal bonds?

This is why municipal bonds generally pay lower yields than similar corporate bonds. Additionally, muni bonds generally require a $5,000 minimum investment while corporate bonds start at $1,000. In short, the risk-reward profile for munis and corporate bonds is different.

Can you buy municipal bonds as an individual?

Many times, investors will purchase municipal bonds on an individual basis. However, you can buy them as part of exchange-traded funds (ETF) and mutual funds as well. These are perfect if you don’t have much to spend on your investments.

What’s the maturity date of a municipal bond?

Maturity dates of these bonds can be anywhere from just a few years to over a decade, allowing you to select the one that’s best for your financial plans. Investors can pick up these bonds through a number of direct and indirect methods. Brokerages remain one of the most direct ways to purchase municipal bonds.

What should the yield be on a muni bond?

Here’s where you decide if a particular muni is for you. Divide its yield—let’s say, 3.05 percent—by your reciprocal rate of 68 percent and you’ll get 4.48 percent. That’s your tax-equivalent yield—your muni tipping point, so to speak.

What kind of risk is a municipal bond?

Municipal bonds are not immune to risk despite their safe nature. In fact, there are three main types of risk to look out for: Interest rate risk: As long as interest rates stay low, the market value of a municipal bond will remain high. However, if interest rates begin to increase, your muni investment could lose overall market value.