- Social Security insured municipal debt no load funds can be a wise investment, but these funds are not for everyone
- Municipal debt is used to fund public projects and projects that improve conditions for the population of the municipality
- Municipal debt funds can have tax advantages, and most municipal bond debt investments are tax exempt from federal and possibly state taxes
Social Security insured municipal debt no load funds may seem very complex and difficult to understand, but these investments do offer many advantages and are ideal for a large number of investors. Social Security insured funds mean that the Social Security Administration insures the bonds against default. This means that if the bond issuer does not make the interest or principal payment on time, the payment is insured and will be made by Social Security instead. These investments are normally municipal bond debt, and these municipal debt funds are considered very safe and extremely low risk. This is because these investments are guaranteed by a branch of the United States Government. The odds of both the municipal debt security issuer and the Social Security Administration both defaulting and not making the payments as scheduled are almost non existent. Municipal debt also offers some unique tax advantages, because there are no federal taxes levied on these investments and yields. In addition, if you invest in the state you live in, such as state municipal bond debt or a city or other municipality in your state, there are usually no state taxes levied either. Municipal debt securities are issued to raise money for the operation and funding of projects for the good of the public and local populations.
Social Security insured debt securities, just like all insured bonds, have lower risks of default simply because the bonds are insured. Municipal debt funds and securities will allow you to keep your investment capital relatively safe, without the high volatility that is present in many other investment types, like the stock market. Municipal debt can be very varied, from securities issued to build hospitals, schools, police and fire departments, and other public buildings, to bonds that are issued to build roads, bridges, and other infrastructure improvements that are needed. Municipal debt funds and municipal bond debt is graded just like other bond types, and these ratings go from high quality investor class bonds to junk bonds that can involve more risk because of lower credit ratings. Not all municipal debt securities are perfect for every investor, even ones that are social security insured. With any investment there is always a risk of losing money, and this is true even with municipal debt securities. No investment is guaranteed not to have any risks, but municipal bonds are considered a safe investment option, and this is especially true when these bonds are insured by social security.
Choosing social security insured municipal debt no load funds makes good financial sense from an expense point of view as well. There are two general types of mutual funds, load funds and no load funds. Load funds charge a fee which may be as high as eight percent or even more, and this load fee may be charged up front when you buy, on the back end when you sell, or continuously assessed while you are invested in the fund. Load fees take a big bite out of your investment capital and returns, and this is true concerning municipal debt mutual funds as well. The load fee is given to the broker or financial advisor for directing you to the specific fund, so it is at the most basic a sales commission. Instead you can research and compare municipal bond debt mutual funds on your own, and save the load fee to invest instead. Use caution, and look at any 12b-1 marketing fee charged. Sometimes mutual funds can be deceptive and call themselves no load funds when there is actually a high 12b-1 marketing fee that includes sales commissions. The best no loads are usually ones which charge no load fees or 12b-1 marketing fees.