Best Municipal Bonds – What States to Invest In?

Best Municipal Bonds

Investing in municipal bonds, especially the ones that offer tax exempt interest payments, could be a great long term investment and help fund development of a certain state or city. Deciding in which municipal bonds to invest is not an easy decision as it takes thorough understanding of a specific state or city you are willing to invest into.

Many states have been facing severe budget deficits due to recent credit collapse and have been struggling to pay salaries and had to resort to significant lay offs. Major development projects had to be put on halt or stopped altogether. When deciding which best municipal bonds are worth investing into, look at the specific state of city and see if it might be a decent investment in the long run. It is very unlikely that, for example, California municipal bonds can be a wise investment due to their serious budget deficit of the last year.

Avoid investing in best municipal bonds issued by states focused solely on one industry like auto or tourism due to a high probability of default in case of a major economic downturn or events of catastrophic proportions. Definitely stay away from buying more than 20% of your investment portfolio into one type of even high yield municipal bonds.

While looking for the best municipal bonds, why not start researching bonds issued by cities of the state you reside in? In most states, tax exempt interest income for municipal bonds is reserved for the actual residents of the state. For example, residents of Florida are able to receive tax exempt interest earnings on Florida municipal bonds. In case a resident from Arizona decides upon investing in Florida municipal bonds, he might be responsible for paying Florida’s income tax.