What is the best way to invest in tax-free municipal bonds?
Owing to the credit risk, the best is to diversify your bond portfolio and hence invest in atleast 4 to 5 different tax-free municipal bonds. However, that may be costly as tax-free municipal bonds usually cost atleast $5000 each. So other alternative is to invest in Money Market Mutual Funds or Bond Funds, which are like mutual funds which pool in the customer’s money and offer units for cheap. One disadvantage is that a bond fund never matures, which increases interest rate risk.
