| Municipal bond funds are those which are made of | | | | of the bond is otherwise equal to that of a bond |
| bonds issued by governments and related | | | | issued elsewhere. This can at first appear to be a |
| organizations at both the local and country level. | | | | simple choice. Of course you would go with the |
| Investors favor these type of bonds because of | | | | fund that has the potentiality of providing a high |
| the Pleasant tax treatment they can get. | | | | yield. |
| What is Pleasant about this municipal bond fund is | | | | Still, you should take into consideration the pre-tax |
| that it is tax free at the national level. That is | | | | yield that the bond offers as well|But then, you |
| because the fund itself owns the bonds that are | | | | should look at the pre-tax yield that is provided. It |
| issued. Because of the tax implications of these | | | | is because the tax-equivalent yield will supply you |
| funds, the municipalities releasing bonds took in | | | | with a computation that can be compared on an |
| them are put shorter yield bonds on the market | | | | equal basis. This is accomplished by calculating the |
| but still attract investors. | | | | pre-tax yield of the bond which is taxable so you |
| Determining if municipal bond funds are the right | | | | know what it would have to pay in order to equal |
| investment can often be carried out by executing | | | | the tax-free municipal bond yield. |
| a simple calculation of the tax-equivalent | | | | On the other hand, to get the tax-equivalent yield, |
| yield|There are ways to calculate in order to know | | | | you must identify the tax bracket. And the |
| if the municipal bonds are Pleasant for | | | | formula for that is the interest rate return |
| investments. One of these is to figure the | | | | percentage divided by one and it should be |
| tax-equivaent yield}. | | | | minused by the tax bracket percentile. {As an |
| {Seeing the tax-equivalent yield will make it easier | | | | example, let s say you are in the 35th tax |
| to discover if a tax-free municipal bond or a | | | | bracket percentile and the bond fund you re |
| taxable bond offered from another root is a well | | | | considering has a return of 4%. In this case, your |
| investment for you.|Examining the tax-equivalent | | | | calculation |
| yield will help you identify if the municipal bond | | | | The result given above tells us that your taxable |
| that are offereb by other sources are Good. | | | | bond needs a yield of 6.15% to become the |
| Many investors make the error of looking only at | | | | equivalent of a tax-free municipal bond that has a |
| the interest return rate on bond funds. Due to the | | | | 4% yield. In general, this inly means that municipal |
| nature of municipal bonds, they tend to have a | | | | bond funds are more preferable compared to |
| shorter yield, even if the maturity life and quality | | | | taxable bonds because of the tax implications. |