Bond Investment

I am a risk averse investor and I am thinking if government bonds are the the right investment for me.On Charles schwab they say that the yield of AAA munis is Yield/1-0.396 . It comes out to approx 8.5 % if the rate offered in the market for a Muni is 3.5%.I have two questions.

1.Is it true?
  1. Are there any goverenment bonds with a higher yield?

Shruti

Reply to
Finance Girl
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Which risk are you adverse to? Principal risk, inflation risk, deflation risk, currency risk, credit risk, volatility risk or some other risk? The current top federal tax bracket is only 35%, so muni AAA 3.5%/(1-.35) 5.385% taxable. In the 15 % bracket you only get 3.5%/(1-.15) = 4.118 % taxable. In a high income tax state you get better taxable equivalents for that state's muni paper. US treasury issues are not subject to state income taxes.

AAA paper today may not be AAA 5 or 10 years down the road. If you don't fully understand why any bond has a higher yield than the same maturity US Treasury issue, you shouldn't own it.

For the long term investor equities outperform bonds.

Reply to
catalpa

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