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How do you buy Muni's?
Old 06-21-2014, 01:28 PM   #1
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How do you buy Muni's?

I'm stumped. How does one find a source of muni's for one's own state? We live in a small state. Our brokerage account is with Merrill Lynch. The offerings through that source are very meager for our state and not that great for other states in general, it seems to me.

We have checked out the website MuniOS.com, which is very helpful in detailing offerings, new and old by state. Yet when I try to find a particular bond I can't seem to find a good source.

Do any forum members know of a brokerage firm specializing in Muni's that either had a large inventory or will go out into the secondary market in search of issues?

Any help would be appreciated.
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Old 06-21-2014, 01:53 PM   #2
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Are you looking for actual individually issued muni bonds for a specific state?

Lots of brokerage 'houses', like Fidelity have muni funds by state.
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Old 06-21-2014, 02:06 PM   #3
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I purchase individual bonds in different states from fidelity. Pretty easy. I don't have state income tax. I spread my money about state to state trying to fill gaps. I own a defaulted Detroit bond that's insured and some really beaten down Puerto Rico bonds. PR bonds are tax free in all states though based on the prices risky. There may be other options like this. I don't look because it doesn't affect me.
You can find ETFs that cater to each state and they may be cheap enough to use instead. I have only done the national MUB (no AMT) and HYD (AMT). MUB was nice because it paid monthly.
Work out if AMT is a problem for you. There may be cheaper places than fidelity. Watch the spreads though. They make a lot of money from them.
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Old 06-21-2014, 02:39 PM   #4
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Thanks Neill and BBQ nut - I have just checked the Fidelity holdings and can see some bonds from my state. They are slightly better than Merrill Lynch's offering, with respect to the actual bonds offered, but they are still pretty sparse. I do thank you both for the suggestion.
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Old 06-21-2014, 02:40 PM   #5
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Originally Posted by Golden sunsets View Post
I'm stumped. How does one find a source of muni's for one's own state? We live in a small state. Our brokerage account is with Merrill Lynch. The offerings through that source are very meager for our state and not that great for other states in general, it seems to me.
Just buy a fund from Vanguard that invests in many states. Merrill Lynch is usually very expensive unless you are talking about Merrill Edge.
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Old 06-21-2014, 02:43 PM   #6
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Thanks Neill and BBQ nut - I have just checked the Fidelity holdings and can see some bonds from my state. They are slightly better than Merrill Lynch's offering, with respect to the actual bonds offered, but they are still pretty sparse. I do thank you both for the suggestion.
Look again when the market is open and you will probably find much better selection.
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Old 06-21-2014, 03:02 PM   #7
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I haven't purchased any individual munis. I stick with low cost ETFs with not much/zero leverage. The data is not always available, but I also look for average bond price and coupon, and compare it to the current payout to see if it's sustainable.

There is also 1 or 2 muni ETF that are target-maturity (close up shop on a certain date in the future), that I like, since the end date and price is known.

In the past, I've thought about buying individual issues, and the search at both Vanguard and TD Ameritrade turned up a few - but realize that these are likely not 'in inventory', but just the listing of muni bonds on the network....so as far as I am aware, you should be seeing most of the same listings regardless of broker, unless they have some in-house positions that they're trying to sell.
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Old 06-21-2014, 03:36 PM   #8
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Golden,

You can buy from two sources at Fidelity. New issues and secondary market. You should check both for your state and state tax exempt sources.
In new issues you don't know what rate your going to get. Just a guess.
I have done well buying these though. There is some waiting involved.
I purchase individual munies. Originally I purchased in $30k chunks as this was the point the buy fees became a minimum but since then they changed the structure.
I keep the chunks about the same now. I have been doing this for a bit over a decade. I buy and hold till maturity or call. Had a few bonds called + strange offerings for cash to change bond contract. I keep the maturity to about 10 years based on the advise in 'stocks for the long run' were they say the risk is too high (higher that stocks) above that.
Munies aren't very liquid and these is a shortage right now. States are not issuing and there is more demand because of NIIT (net investment income tax).
Check out the de-minimis rules (sp?). Discounted munies can be taxable on the discount if it is big. Losses are disallowed but a loss on an muni ETF can be taken but there are some different holding period rules.
Make sure they are for you on an after tax basis. People often say you need to be in the top two tax brackets for them.
So that's 35% and 39.6%. This can miss the fact that if you are subject to AMT and are paying the 28% AMT rate then the 0% AMT bracket is being phase out at $1 per $4 of any income.
So your marginal tax rate is conveniently 28% + 28% / 4 = 35%! That can affect income over a huge range.
So munies might make sense for a lot of people who discount them.
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