Friday, March 22, 2013 - 12:25 PM

CDs Verses Bond Funds

For those getting their feet wet in bond funds this Vanguard article touches
some basics that need to be understood:

      What makes sense with savings accounts, CDs, and other FDIC-insured
      instruments [the interest rate], however, can lead you astray with
      bond funds. The selection of a savings account is a one-dimensional
      decision. Bond fund selection has three: the yield (or interest rate),
      risk, and cost.

Read more:

cumulus133 posts since
Jan 16, 2010
Rep Points: 583

1. Friday, March 22, 2013 - 4:19 PM

Dear cumulus,

Perhaps taxable or Federal tax-free, and Federal+State tax-free is the 4th dimension in it own right, rahter than simply being part of the yield.

When evaluating the Muni Bonds, the tax-bracket of the trader wanting to buy these is an important consideration. Furthermore, there are quite a few mutual funds and ETFs that are completely made up of municipal bonds of a state, and can make significant tax savings for states with high state income taxes (e.g. CA, NY).

Yours Truly,
- Anon

ytyt64 posts since
Feb 28, 2013
Rep Points: 179