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Finance Flash Go! Episode #46: Municipal Bonds

Today on the Finance Flash Go! podcast, we are going local and organic as we discuss municipal bonds!

Listen to the full episode and subscribe here!

What are municipal bonds?

A municipal bond is a bond (or “debt” or “IOU”) issued by a state or municipality to fund public works. Like other bonds, investors lend money to the issuer for a predetermined period of time, also known as the maturity of the bond. The issuer promises to pay the investor interest over the term of the bond (usually twice a year), and then return the principal back to the investor when the bond matures – that’s how all bonds work. The only difference is a municipal bond is lended locally to a municipality rather than the state or federal government.

municipal bonds

Municipal bonds are considered quite safe with a low default rate and are very tax efficient as their interest is tax free. This is in contrast to most bonds that are tax inefficient.

Therefore, municipal bonds are good to hold in a taxable account while other bonds should usually be held in a tax advantaged account.

You can also of course by index funds of municipal bonds.

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I really hope that you all enjoy the Finance Flash Go podcast! We plan to release a new episode every weekday answering important finance questions. If you ever want to submit a question to our podcast, send an e-mail to [email protected].

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    Jordan Frey MD, a plastic surgeon in Buffalo, NY, is one of the fastest-growing physician finance bloggers in the world. See how he went from financially clueless to increasing his net worth by $1M in 1 year and how you can do the same! Feel free to send Jordan a message at [email protected].

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