Municipal bond types, mutual funds, ETFs, REITs, annuities and variable products.
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- What is a municipal bond?
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A debt security issued by a state, city, or local government to finance public projects. Interest income is typically exempt from federal and sometimes state and local taxes.- What is a general obligation (GO) bond?
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A municipal bond backed by the full faith and credit of the issuing municipality, with repayment coming from general tax revenue.- What is a revenue bond?
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A municipal bond backed by revenues from a specific project or source, such as tolls from a bridge or water utility fees.- What is a private activity bond?
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A municipal bond that finances private business or facilities but retains tax-exempt status if it meets IRS requirements. Interest may be subject to the alternative minimum tax.- What is a pre-refunded bond?
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A municipal bond whose issuer has set aside proceeds in an escrow account to repay the bond at a future call date, reducing credit risk.- What is an industrial development bond (IDB)?
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A municipal bond issued to finance equipment or facilities for private business use, with repayment from the business tenant.- What is an arbitrage bond?
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A municipal bond whose proceeds are invested in higher-yielding taxable securities. The IRS restricts these to prevent tax abuse.- What is a moral obligation bond?
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A municipal bond backed by the moral rather than legal obligation of the issuer to appropriate funds for debt service if revenues fall short.- What does municipal bond insurance do?
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Guarantees payment of principal and interest if the issuer defaults, improving the bond's credit rating and lowering its yield.- What is a hybrid bond?
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A municipal bond that combines features of general obligation and revenue bonds, backed by both tax revenue and specific project revenue.- What is a mutual fund?
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An investment company that pools money from investors to purchase a diversified portfolio of securities managed by a professional investment manager.- What is the difference between an open-end and closed-end mutual fund?
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Open-end funds issue and redeem shares continuously at net asset value. Closed-end funds issue a fixed number of shares that trade on exchanges at market price.- What is net asset value (NAV)?
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The per-share value of a mutual fund, calculated by dividing total fund assets minus liabilities by the number of outstanding shares.- What is a front-end load?
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A sales charge deducted from an investor's initial investment when buying mutual fund shares, reducing the amount actually invested.- What is a back-end load?
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A sales charge deducted when an investor redeems mutual fund shares, typically declining over a set holding period.
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