How To Buy Closed End Municipal Bonds ?
| Municipal bonds that are traded in the secondary market are known as closed end municipal bonds. These are actually funds who primarily invest in municipal bonds, both tax exempt and taxable, and the funds are managed and traded either on an exchange or over the counter market. |
When you buy a closed end municipal bond, you will have to pay a commission for purchasing the fund the way you would when buying shares of individual stocks.
The reason why people are attracted to closed end municipal bonds is that they can be traded during the day, unlike open ended mutual funds. As an individual, buying closed end municipal bonds leaves no room for trading as the bond does not move aggressively in price on a daily or weekly basis. However, closed end fund managers are very active and this means that the prices are also very active.
Closed end municipal bonds are like any other bonds. They provide dividends on a regular basis and you will get regular payout from these closed end municipal bond fund. The reason why you should opt for closed end municipal bond funds is that you can take part in the muni market as the fund manager will invest your money in hundreds of bonds. The fund manager ensures that you can invest in large quantities of different municipal bonds for less money than you would if you were to purchase muni bonds in an individual capacity. It is the task of the fund manager to manage the money, maturities and interest rate changes.
The price of a closed end municipal bond is determined by based on the supply and demand, and the market directions. Each day the net asset value (NAV) of the municipal bond fund is calculated.
More Articles :
|
