The Best Place to Find Income
By Rodney Johnson, Senior Editor, Survive & Prosper
The best place to find income is where few are looking. And right now, few are looking at municipal bonds.
That’s not surprising. After all, who would want to buy Jefferson County, Alabama bonds? It declared bankruptcy a while ago… and not much has improved there since then.
What about Vallejo, California? Not many takers there.
How about the city of Harrisburg, Pennsylvania? No, it went bankrupt.
Detroit anyone?
I didn’t think so.
These are just a few examples of bad municipal bond investments. But given the sleepy state of this market, these few problems have caused widespread fear. The fact that ANY municipality could and would go bankrupt now gives investors pause.
That’s good news for us. It’s cleared the way for us to scour the landscape for deals.
Our Survival Depends on It
There are several municipal bond options to choose from. But there’s only one bond type I’d consider. That is essential service bonds, like water and sewer bonds. They’re backed by payments for use – that is people paying their water and electric bills every month – which makes them a safe way to boost your fixed income.
Think about it. Water and sewerage are essential to our survival. Few, if any, will simply stop using them and/or paying for them, even as the economy slips back into recession.
Toll road bonds are also a good choice, particularly in crowded areas such as North Texas. Unless a mass protest on the use of a particular toll road arises, payments are very predictable. As a bond holder, this filters down to you. And in the fixed income world, that kind of security is what you need.
But why do we need fixed income sources now?
Because the Fed will eventually stop its stimulus madness. It’ll start by tapering. When it does, and the markets and economy turn down, you’ll benefit from the income streams you’ve established now.
Also, during deflationary times the dollar strengthens. This means the income you have will increase in value.
And the more cash you have at hand, the more flexible you’ll be when the time comes to jump into rapid-fire investment opportunities.
Look to the essential service bonds for income. You can research them by going to www.emma.msrb.org. The Municipal Securities Rule Making Board (MSRB) created this Electronic Municipal Market Access website to give investors more information on municipal bonds. It enables you to find documents on almost any bond issuance!
And do your research in this market. It will pay off big time.