I Want YOU... to Guard Your Money

Generate tax-free and (almost) risk-free returns! [Shield] AN OXFORD CLUB PUBLICATION [Wealthy Retirement]( [View in browser]( SPONSORED [92-Year-Old Multimillionaire's Strange Deathbed Regret]( [Old man in garden]( 92-year-old newfound multimillionaire Marvin turned $635K into $3.6M in 9 years. It's a rare example of spectacular financial success, especially at that stage in life. His only regret... he won't live long enough to do it again. YOU still can use his moneymaking secret. See how, [by clicking here.]( Editor's Note: Over the past two weeks, Chief Income Strategist Marc Lichtenfeld has explained why bonds are more conservative than even the bluest of blue chip stocks and told you how he's maintained a 100% win rate on his bond recommendations. In today's column, he goes over a special type of bond whose returns are exempt from federal taxes (and often from state taxes as well). And, in case you missed it, he recently sat down for an [in-depth interview]( about his entire bond philosophy... and why he says there's never been a better time to become a "[Stock Quitter]( [Check out the interview here.]( - Rachel Gearhart, Publisher [FINANCIAL LITERACY]( [I Want YOU... to Guard Your Money]( [Marc Lichtenfeld, Chief Income Strategist, The Oxford Club]( [Marc Lichtenfeld]( As you know, I've been pounding the table on bonds lately. Interest rates are at their highest levels in nearly a generation, which is finally allowing bond buyers to earn some real income. If rates decline next year (as many are expecting), that should lead to profits as well, as bond prices move in the opposite direction of interest rates. So if rates fall, bond prices will rise. Furthermore, bonds are less risky than stocks, because bondholders are guaranteed to get their money back at maturity unless the underlying company goes bankrupt. Stockholders have no such guarantee. But in exchange for the higher risk of owning stocks, equities owners typically make more money over the long term. Today, however, there is a unique opportunity to generate long-term stocklike returns with almost no risk. And to make it even sweeter, the IRS can't put its grubby hands on the money. Some municipal bonds (also known as munis) are currently paying more than 5%. Now, you may be thinking, "Wait a second... 5% is nice, but it's hardly a stocklike return." And you'd be right... partially. Since 1971, the S&P 500 has generated an annual return of 7.6%. But don't forget that dividends and capital gains are taxed, so an investor wouldn't have taken home the full 7.6%. Most muni bonds, however, are tax-free. You don't pay any federal tax on the income, and if you live in the state that issued the bond, you don't pay any state tax either. So when you look at a muni bond, you have to figure out the taxable-equivalent yield to see whether it makes more sense to buy a taxable bond with a higher return or a tax-free muni bond with a lower return. Today, you can buy a Missouri Highways and Transportation Commission (CUSIP 60636wnu5) May 2033 bond that has a yield to maturity - a common way to express a bond's annual return - of 5.42%. In other words, you can expect to earn about 5.4% per year for 10 years tax-free. SPONSORED ["Weird" Savings Account Boost (Seniors Shocked)]( [Boost_Income]( "Magic Code" FORCES Banks to Pay You Up to [255 Times MORE Cash Interest]( (Give This Code to Your Bank ASAP.) [Show Me the Code!]( To calculate the taxable-equivalent yield, you simply divide the bond yield by 1 minus your tax rate. You can also find free taxable-equivalent yield calculators online, such as [this one](. But let's go through the math on this bond so you can see what I'm talking about. Let's say you're in the 32% tax bracket. We take the 5.42% yield to maturity and divide it by 1 minus 0.32, or 0.68. So 5.42% divided by 0.68 equals 7.97%. You'd need to earn more than 7.97% per year in a taxable investment to beat this particular muni bond. Remember, stocks return an average of 7.6% before taxes. This muni bond returns 7.97% on a taxable-equivalent basis for bondholders in the 32% tax bracket. That return is guaranteed, and the bond has a very high rating of AA+, which means there is almost no chance of default. The risk with bonds is opportunity risk. By owning this bond, you are guaranteed a 7.97% annual taxable-equivalent return for 10 years, so if stocks have a big decade, you could miss out on some gains. Of course, if we hit a nasty period, stocks may return less than your bond or even lose value. There are a few other things to keep in mind. First, your money would not be locked up for 10 years. You could sell the bond anytime you wanted. You just wouldn't be guaranteed the same return if you were to sell early. It could be higher or lower depending on the price at which you sold the bond. Also, the taxable-equivalent yield will depend on your tax bracket. If you're in a lower tax bracket, then the taxable-equivalent yield will be lower, so there may be some better deals out there in taxable bonds and stocks. If you're in a high tax bracket, then muni bonds become more valuable. Finally, you can generate even greater returns by buying bonds that have lower ratings, but when it comes to munis, I wouldn't buy anything rated lower than A. After all, one of the attractive features of munis is the certainty that you'll be paid back in full at maturity. It's definitely worth your time to make sure you understand muni bonds. I recommend you look for some good opportunities to generate tax-free income and returns with almost no risk. Good investing, Marc [Leave a Comment]( [Investment U Conference 2024 at the Ojai Valley Inn & Spa in Ojai, California, February 26-29, 2024]( RECOMMENDED LINKS [Discover the $12 Energy Company Paying a Nearly DOUBLE-DIGIT Yield That Just STUNNED Investors With Plans to Increase It Much Higher]( [One of Marc's Readers Made Nearly $100,000 on This Type of Investment When It Skyrocketed 907% in Just 10 Months. Another Made $1.3 Million! 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