For Iris Atkinson-Kirkland, municipal bonds not only represent a security blanket but also a great way to earn a considerable return. A conservative investor by nature, the 48-year-old accountant has always sought a safe haven-especially during unpredictable times.
That’s the primary reason she’s put roughly 45% of her $150,000 portfolio in municipal, or muni, bond funds. “I’ve worked at banks for over 15 years and for me, the name of the game is preserving capital and keeping risk to a minimum,” says Kirkland, who lives in Hempstead, New York.
Her strategy has paid off: thanks to the recent decline in interest rates, Kirkland’s main muni fund, Putnam New York Investment Grade (800-634-1587), gained almost 18% in 1997 and has produced an 11% total return as of mid-December 1998.
You’d be hard-pressed to find glamour or excitement in Kirkland’s sane investments. That’s because over the years, munis, along with Treasury bonds and utility stocks, have won the well-deserved reputation of being mild-mannered, milquetoast investments that a broker would probably recommend to your grandmother. That’s for a good reason. Through thick and thin, they all provide holders with a regular stream of income and tend not to fluctuate much in value. While you’re not likely to lose a thread off your shirt or blouse investing in any of the three, you’ll probably not see the kind of beefy gains the stock market has racked up over the past few years.
Then, why bother when you can put your money in a hot technology stock that’s ready to zoom to the stratosphere? Well, for one, investment pros will tell you that any good portfolio has an anchor in investments that won’t lose their value and will produce income no matter what happens. Treasury bonds and munis pass muster, thanks to yields of 5% or so. What’s more, they promise to pay back your original investment upon maturity. We have included utility stocks in the mix because they act as bond surrogates. As a whole, they operate in a steady sector and offer an average yield of 4.5% in the form
of a dividend. “Depending on your risk tolerance level, at least 30% of your portfolio should be invested in bonds,” says Craig Simmons, chief investment strategist and head of fixed income for Ashland Global Securities, a New York institutional investment firm. “Certainly, the older you get, the greater the percentage of the allocation of those assets. But anyone in his or her late 30s should be investing in Treasuries and munis.”
This year, there could be an added reward in socking away a portion of your money in these investments. For one, experts are looking for interest rates to fall. By some accounts, the interest on the 30-year Treasury bond, widely used as the yardstick for fixed income investments, is predicted to tumble as low as 4.5%, down from 5.24% as of press time. That should translate into a nice bonus for investors in treasury bonds, munis and utility stocks. Not only will holders receive a reliable income