Where to find decent income without indecent risk

Peter Hayes continues our Feeling Taxed? series with a look at how tax-exempt municipal bonds provide attractive relative income without an unsavory level of risk.

If you’ve been following our tax-time chart series, you know that municipal bonds offer you the opportunity to keep more of what you earn via an attractive after-tax yield and provide a compelling counterbalance to equity risk. In the third of our five-chart series, Feeling Taxed?, we’ll bring the two ideas together with this simple question:

Are you struggling to derive decent income without indecent risk from your investments?

If the answer is “yes,” then you know this remains a significant challenge in an environment of still-low rates and a mixed economic backdrop. One perfectly “decent” solution: municipal bonds.

Attractive income…

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… with low relative risk

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Peter Hayes, Managing Director, is head of BlackRock’s Municipal Bonds Group and a regular contributor to The Blog.

Investment involves risk. The two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments. There may be less information available on the financial condition of issuers of municipal securities than for public corporations. The market for municipal bonds may be less liquid than for taxable bonds. A portion of the income may be taxable. Some investors may be subject to Alternative Minimum Tax (AMT). Capital gains distributions, if any, are taxable.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of March 28, 2016, and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. There is no guarantee that any forecasts made will come to pass. Any investments named within this material may not necessarily be held in any accounts managed by BlackRock. Reliance upon information in this material is at the sole discretion of the reader.

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