Expert: Doug Ingram - 7/7/2008

Question
I am a single  65 year old  NY State resident making about $60K a year. I have some savings that I want to keep in a safe investment for when I retire in few years.  With interest rates on CDs being extremely low, I have been  considering investing in a municipal bond funds such as VNYTX  

I thought that I would probably be better off and get a better return with such a bond fund  since I am still working , and would not have to pay federal or state tax income tax on them. In addition, I would have flexibility and access to the money if I bought such a bond fund and rather than an individual bond. Am I correct in my reasoning and if not why?  Would appreciate your thoughts.

Thanks


Answer
You get some diversification that way.  I can't fault your thinking.

If you did invest in the individual bonds, they wouldn't be as liquid and you could have some other issues with valuations if you bought longer issues - and rates went up.

Since I don't know your overall situation, I would just say don't put ALL your money in the fund.  A little cash and maybe a little in stock funds as well.  What you are considering is certainly good logic.