The Best Way For Paying Tax Free Income Essay

860 WordsJun 27, 20164 Pages
The Best Way to Earn Tax Free Income Everyone would like to receive income free from income taxes, especially individuals in higher income tax brackets. For tax free income investors have turned to municipal bonds. These are bonds issued by state and local municipalities to provide essential services, such as roads, hospitals, schools, sewers and utilities. Municipal bonds have been around since before the Civil War. While many investors are generally familiar with municipal bonds, in reality the municipal bond market is complex and much different than any other market. This is because the market is very fragmented. There are over one million individual bonds outstanding, from 55,000 different issuers, that comprise this $3.7 trillion market. Contrast one million different municipal bonds with the fact that in the U. S. stock market we have roughly 5-6,000 stocks. Due to the massive size and number of issuers in this market, it is extremely difficult -maybe impossible - for the average investor to do their own research, however almost half of the $3.7 trillion of municipal bonds trading in the market today are held directly by individuals. With this as your backdrop, let’s look at the mechanics of buying and owning municipal bonds and what might be the best way for investors seeking tax free income to proceed. There are three options for owning tax free municipal bonds: individual bonds, open end bond funds or closed end bond funds. Individual Municipal Bonds: Will

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