How to Trade Municipal Bonds
There are two main ways to invest your money: stocks or bonds. Stocks represent an ownership stake in the company, while bonds represent debt. Stocks pay investors in the form of dividends and share-price appreciation whereas bonds pay investors with interest. Some bonds, like municipal bonds, are even tax-deductible, which is an added incentive. Trading municipal bonds is not difficult. The hardest part is finding a broker.
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Instructions
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Research the current bond offerings available. Go to the Department of Revenue for your state and look for municipal bond offerings. For instance, Buycaliforniabonds.com has a listing of municipal bond offerings for California. Use a municipal bond research site to help make your search more efficient.
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Request the prospectus or official statement for the bonds you are interested in. If not listed on the state's website, contact the brokerage or financial institution that led the issuance. Call a state representative with the Department of Revenue if you are unsure about which institution to contact.
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Open a brokerage account with one of the brokerage firms participating in the bond sale if you don't have one already. While it is usually not a requirement to hold an account with the brokerage firm, it will help to lower costs. Each firm has its own requirements for opening an account. The name of the firm will be listed on the official statement or prospectus.
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Contact a broker specializing in top-rated municipal bonds. If you cannot find a good price with the broker or financial institution used by the state, there are municipal bond firms that can help to find the best market to trade your securities. Two examples are FSM Bonds and the GMS Group.
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Place an order to make a final purchase or sale based on your own investment objectives, pricing and maturity dates of bonds.
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