GByrd (WMF)
A belated welcome!
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Again, welcome! Tutelary (talk) 18:08, 15 October 2014 (UTC)
Municipal Bonds
editI don't have a source that says that the municipal bonds are a "red flag". However, investment common sense questions them. You said, at User talk: Jimbo Wales, that the municipal bonds were an attempt to diversify the portfolio into more conservative investments. Was the interest rate on municipal bonds compared to the interest rate on comparably safe high-grade corporate bonds? It is true that municipal bonds are, with a few exceptions, low-risk, but that isn't the only reason for their low rate of return. The issuers are able to pay a lower rate of return than corporate issuers with comparable safety because individual investors take federal income tax into account. The WMF, as a 501(c)(3), should not be taking federal income tax into account. (If a city or county is paying a before-tax rate of return that is competitive with that of a corporate issuer, that would seem to be imprudent on the part of the city or county.) Safety, in itself, isn't a reason why the WMF should be invested in municipal bonds. Is there some other reason? Robert McClenon (talk) 16:32, 16 October 2014 (UTC)
- For the municipal bonds in the portfolio, in our case, the average current yield of our municipal bonds is 2.79% versus the average current yield on our corporate bonds of 2.30%.GByrd (WMF) (talk) 19:14, 16 October 2014 (UTC)
- Thank you. That is interesting. It appears that the research was done and the result appears to be sound. I assume that there are complex underlying reasons why the municipals are paying a higher return than the corporates. (I won't ask for details, because the 501(c)(3) of which I am the president is probably too small to make those investments, and besides, state law separates the roles of president and of treasurer, and I will let my brother make the investment decisions.) In any case, I am satisfied that the municipal bonds are a reasonable investment in spite of the oddity. Thank you. Robert McClenon (talk) 23:39, 16 October 2014 (UTC)