How difficult is it to buy individual munis?

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ilan1h
Posts: 855
Joined: Mon Oct 22, 2007 3:40 pm

How difficult is it to buy individual munis?

Post by ilan1h »

I just sold a huge block of calif. interm muni fund so as to tax loss harvest a fairly significant loss. I will have to wait for 30 days to buy it back. I am now toying with the idea of buying individual munis instead of this fund. How feasible is it, for someone who knows absolutely nothing about it, to buy and hold individual munis. A large sum of money is involved. I've heard that the market is extremely illiquid, one can lose a fortune in fees, indiv munis are difficult to figure out etc. Is there a reasonably easy and safe way to do this without wasting an enormous amount of time and losing my shirt in the process? Obviously the upsides of a fund is that it is simple, easy and relatively safe. The downsides is that inflows and outflows cause fluctuations, and there is no ultimate "guaranteed returns". I am willing to buy calif individ munis and hold them for 10 years if need be.
PatrickS
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Joined: Sat Feb 24, 2007 6:38 pm
Location: San Diego

Post by PatrickS »

From http://latimesblogs.latimes.com/money_c ... -inve.html
Individual investors on Tuesday put in orders to buy $1.84 billion of the short-term notes that California plans to issue on Thursday, a strong reception that reflects the high tax-free yields the state is offering to get the deal done.

Brokerages managing the debt sale for the state will continue to take orders from individuals on Wednesday, then invite institutional orders on Thursday. That’s when the final yields on the IOUs will be announced.
chaz
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Joined: Tue Feb 27, 2007 2:44 pm

Post by chaz »

ilan1h, For indidual muni bonds, visit a bond broker. Try VBS through Vanguard.
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page
PatrickS
Posts: 51
Joined: Sat Feb 24, 2007 6:38 pm
Location: San Diego

Post by PatrickS »

Vanguard's bond desk shows 22 issues with maturities < July 2015 and the highest ratings.

I've never purchased individual munis either and also sold the CA intermediate fund to capture losses. The SEC yield on the admiral fund is currently 4.6% with an average 8 year maturity. About 27% AAA, 50% AA, and 20% A rated.

Maybe someone with more knowledge can comment on whether the diversification of the fund @4.6% and eight year maturity is better than a 4.79% with less than 4 year maturity for the Temecula Vy Calif Uni Sch (AAA) bond shown in the results.
PatrickS
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Joined: Sat Feb 24, 2007 6:38 pm
Location: San Diego

Post by PatrickS »

One other point (sorry for all the posts). Would buying an individual CA muni bond <30 days after selling the fund still make the loss eligible for taxes?
Gregory
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Joined: Tue Feb 20, 2007 2:26 pm

Post by Gregory »

Best advice I've gotten when I've purchased individual muni's was to buy only new issues. Also, I point blank ask my bond broker what he's making on each trade.

By all means diversify.

Good luck.
Pecuniae imperare oportet, non servire. | Fortuna vitrea est; tum cum splendit frangitur. -Syrus
PatrickS
Posts: 51
Joined: Sat Feb 24, 2007 6:38 pm
Location: San Diego

Post by PatrickS »

Gregory,

Have you ever bought any munis through Vanguard's bond desk?
Topic Author
ilan1h
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Joined: Mon Oct 22, 2007 3:40 pm

Post by ilan1h »

Apparently California IOU bonds have been offered on thursday. Th e yield is high (around 4.2%) and I think this is backed by the full faith and credit of the state. I don't know if these are GO bonds or something different. They are for 8 months and may be a very reasonable place to park one's cash. I can't imagine CA defaulting within the next 8 months. I will call Vanguard tomorrow and see if I can purchase these.

Addendum:
Called Vanguard bond desk and these are gone. Too bad, sounded like a good investment.
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