Skip to Content
The Short Answer

Do Municipal Bonds Have a Place in My Portfolio?

Consider the tax implications before adding a muni investment to your portfolio.

Mentioned: , ,

Question: I know that municipal bonds offer great tax breaks for investors, but I'm not sure they make sense for my portfolio because I'm not in the highest tax bracket. Am I better off investing in municipal bonds or traditional bond funds? How would I know?

Answer: Bond yields have dropped precipitously in recent years, dragging down future bond returns in the process. (Current yields have historically been a good predictor of what to expect from bonds.) But for income-oriented, tax-conscious investors, muni bonds might still serve a worthy role--even for people whose taxable income doesn't land them in the highest tax bracket. does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.