Where can you find decent returns in these low-yield times?
Think taxable, not tax-exempt. The average taxable bond fund now pays 5 percent according to Morningstar Inc., of Chicago. If you’re in a 40 percent tax bracket (federal, state, local), you’d net only 3 percent. You’re much better off in municipal bond funds, where the average yield is 4.2 percent.
Open your mind to closed-end funds. Unlike regular mutual funds, also known as open-end funds, closed-end funds trade on an exchange. You buy these funds like a stock, on an exchange, so you don’t have to worry about paying an excess markup buying individual bonds.
Liquidity is excellent so you can sell at the market price if you need cash. There are many funds in this category, some yielding over 5 percent, tax-free. Investors in high-tax states can buy closed-end muni funds that offer state as well as federal tax exemption.
