After a recent sell-off, closed-end municipal bond funds now present opportunities for both income and potential share-price growth.
. Increased tax revenues — up about 25% in the first half of this year over 2021, thanks to the economic recovery — have further swelled coffers, Pew found.Purchased directly, muni bonds often require a minimum investment of $25,000-$50,000 apiece, making it difficult to diversify holdings. Owning shares of funds solves this problem, and investors can diversify further by using multiple funds.
Eventually, the current discount will narrow because share prices are likely to come back into alignment with net asset values. Historically, they always have, eventually.It's generally better to own muni funds rather than bonds themselves, even if your portfolio is large enough to justify this. Typically, the best bond offerings are snapped up by institutional buyers as soon as they hit the market.
Take note of funds' expenses and leverage. As with any investment fund, one reason some CEFs pay higher yields than others may be that their expense ratios are lower or their leverage is higher.
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