CASE STUDY #1:

How understanding the complete financial picture

for a client can make a difference.

My clients, who are nearing retirement, sold their New York City apartment and wanted to invest the proceeds of $2.0 million in tax free bonds.   Ordinarily, for a portfolio of that size, I would have recommended the purchase of individual municipal bonds of varying maturities. However, I knew that my clients were planning to move in three years to North Carolina when they retired.

Buying individual New York bond issues would have subjected my clients to another round of transaction costs when they eventually moved to North Carolina – they would have had to sell all their New York bonds and replace them with North Carolina bonds to get the maximum tax free income.  Instead, I recommended that they purchase a municipal bond fund offered by a major mutual fund company.

When my clients eventually move, they will be able to exchange their New York municipal bond fund shares for shares in the same mutual fund family’s North Carolina municipal bond fund at Net Asset Value and without any additional transaction charges thereby saving them valuable dollars in retirement.

 

Legal Disclosure:  The value of an investment in bonds and other fixed income securities is subject to changes in interest rates, risk of default by the issuers and the loss of purchasing power due to inflation.  A bond’s return is directly linked to its underlying risk.  Carefully discuss any fixed income investment with your registered representative before investing.