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Bonds Are a 'Safe' Investment: A Big Lie Gets Even Bigger"Think munis are a risky deal?" asks income expert Neil George. In his Stocks that Pay You, he states, "Don't. Instead, buy them now."
However, rather than buying individual bonds, the advisor suggests that investors focus on buying closed-end muni bond funds. Here, he looks at a trio of favorites.
"The muni market isn't for the uninformed or the novice. Unlike the treasury market and much of the corporate market - when it comes to munis - you have to know each bond inside and out before you buy, and keep tabs on it after you buy.
"Everything - from visible supply, calls, sinking funds, and underlying backing and assets, to who is trading them - comes into play. I know - I've traded them professionally. This is why I like the closed end funds.
"I continue to recommend three very specific closed-end muni funds that have proven over time to pay and perform: they are the AllianceBerstein National Muni Income (NYSE: AFB), The Nuveen Quality Income (NYSE: NQU) and the Blackrock Muni Income Trust II (NYSE: BLE).
"What sets them apart is the underling quality of the munis that they own and manage. And how they keep coming through with checks to their owners throughout the year.
"I have been recommending these for the past year and they have been quietly performing like they should: the average return for the three is 27% for the year.
"And while you might think that they may have gotten expensive, don't: They trade at a 4% discount to the liquidation value of their cash and bonds.
"And they pay you quite well to own them, with an average Federal tax-free yield of 7.4%. For those of you in the 35% tax range, that equates to an after-tax equivalent yield of over 11.3%."
Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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