Regardless of whether you have never invested before or have been investing for years and have a very diverse portfolio you need to understand the municipal bond market before you make a purchase. Let us take a brief look.
Municipal bonds (sometimes referred to as muni bonds or munis) are the debt obligations of a variety of entities including states, the political subdivisions of the states, and a selection of agencies and authorities. The municipal bond market is a very vast institution that provides the vehicle for which more than 50,000 local and state government units are able to raise money for necessary aspects of a properly run society. These elements include such things as schools, highways, water and sewer systems and public buildings.
Under the current federal income tax law the interest income that comes from munis is exempt from federal income taxes. In most states including New Jersey interest income that comes from New Jersey bonds (New Jersey NJ municipal bonds) issued by the government is exempt from state and local income taxes as well. This is not the case however if the investor lives in one state and purchases bonds from another state. The interest income from bonds that are issued by United States territories and possessions is exempt from all types of taxes in all 50 states as well. This includes federal, state and local income taxes.
Besides the obvious tax advantages of municipal bonds they also have an excellent record of paying interest as well as principal on time. Studies have shown that in the past 50 years less than one percent of the thousands of municipal bonds that have been issued have run into default. This is good news for anyone interested in investing in New Jersey bonds (New Jersey municipal bonds).
New Jersey is not the only state where munis are popular. More and more investors’ young and old alike are coming to see the many benefits of them. The individual ownership of municipal bonds has shown tremendous growth in the past two decades. In 1980 it was an estimated $130 billion. As of the end of 2007 it was up to $1,852 billion. If you are a New Jersey resident who wishes to invest then one option is to look to New Jersey bonds (New Jersey NJ municipal bonds). Look to the website http://newjersey.municipalbonds.com/ to find out what bonds are for sale as well as what the trades are for any given day. Another website that is worth visiting is BuyNJBonds.gov