Tad Borek:
PIMCO Bond God Bill Gross was recently quoted in Barrons as saying he invests in closed end municipal bond funds. While I'm sure his portfolio also includes individual bonds, I think it's significant that even somebody as sophisticated as Bill Gross sees the value in buying munis via a fund.
That's some bid/ask spread! In today's low-rate environment, that's just a killer.
Meanwhile, last time I checked, Vanguard's Long Term Munibond fund (VWLTX) charged about 16 basis points (0.16 percent) annually.
Excellent point. And I'll add that if you're giving away three to five percent in transaction costs to own individual bonds, you can easily accept the fluctuating net asset value that comes with investing via a fund. Unless some emergency causes you to sell after a sharp backup in rates, the risk to your principal is very manageable. Which, to my mind, eliminates the last reason to hold individual bonds.
If you're in a high-tax state, you can find state-specific closed end munibond funds by searching at