5 ms·
> If the interest rate the market is willing to pay for a particular muni bond rises, that bond will be worth less and that difference is extremely easy to calc
by exclusiv 10y ago
> If the interest rate the market is willing to pay for a particular muni bond rises, that bond will be worth less and that difference is extremely easy to calculate.
I think you are thinking of individual bonds and I agree, but the fixed income muni bond funds are not as easy to calculate and don't fluctuate as much.
> The fact that rate is rising means that investors are not giving as high of a value. The better way to think about this is that investors decide the Muni bond and other fixed income assets are worth less so they pay less so the yield rises. It is kind of opposite of how you are thinking about it.
Not the opposite at all. If a bond fund is paying 30 cents per share each month and investors value the bond less causing a price drop, the yield goes up as I mentioned and becomes more attractive. The drop isn't as significant as you would think. The funds are diversified across various bonds with different maturities. If investors devalue a fund too much after an interest rate hike, I'll buy more at a higher yield.
> Muni bonds are no more 'safe' than other investments.
I don't agree here. Muni bonds are a debt obligation with a lower level of default compared to other bonds. If they weren't safer than other investments very few people would care about them. The stock market is just legalized gambling. The article is about LC and I've proposed an alternative. Do you not think muni bonds are safer than other bonds or LC?
> It sounds like you are highly exposed to interest rate risk in your portfolio and you should work really hard to understand it more clearly.
I'm not that exposed to interest rate risk. I have more in cash than muni bonds. I buy cash flow positive properties and have a fixed rate mortgage. Most of my money is in my companies and I have two successful ones (one in tech services and one highly profitable subscription model business). They're the only investments I trust.