Vanguard Long Term Tax Exempt Insured Fund

[lawman]

How safe is this fund?
It says bonds and interest payments are insured but does not say by whom. Is there anything other than an FDIC insured C. D. that would be safer?

 

[JB]

Treasury MM Fund, or Admiral Treasury. These are not fed tax exempt.

 

[2B]

How safe is this fund?
It says bonds and interest payments are insured but does not say by whom. Is there anything other than an FDIC insured C. D. that would be safer?

The municipal bond "insurance" is by the same companies that have been in the news for losing their triple A credit rating. To my knowledge, no insured bonds have defaulted that have not been made whole by these companies but I also don't know how much stress has been placed on them. Unless they get triple A credit, they won't write any new policies.

The interest rates are probably pretty good on the bonds. I personally wouldn't buy a fund but would consider highly rated individual bonds with or without credit insurance. I'd certainly be highly diversified and plan on holding to maturity.

If you really, really, really want to get your money back with interest you should just get US government debt obligations or FDIC insured CDs. The interest rates are painfully low but it sure is better than what the bondholders of AIG will get.