Tax-free bonds: No small plum in a high-income-tax world

Alexandra Lebenthal, bond expert and New York-based wealth manager, frequently makes perhaps the most compelling case for municipal bonds, moving forward: with effective tax rates for upper-income filers likely to reach (or exceed) 50% -- reducing your tax obligation on a portion of your portfolio by 50% is no modest achievement or gain.

Bonds: the 'unsung hero'

Bonds are sort of the 'most underrated athlete' or 'overlooked cousin' in the investment world. When the economy is growing, which is the normal state, stocks are usually flying, or at least appreciating mildly. During these periods, the focus is mostly on stocks, the sexy investments.

Conversely, when a recession hits, investors, some of whom were burned badly by the decline, get so turned off to investing that they shift their money to cash/certificates of deposit in a wholesale way, often bypassing the bond option.

That's a mistake, in my view: a 4.75% or 4.5% tax-free rate can add up over decades, and high-rate bonds have the double benefit of smoothing-out or offsetting riskier investments.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.