How to Buy Municipal Bonds

Many people wonder how to buy municipal bonds, which are a bit different from other investments. Municipal bonds present the advantage of tax-exempt income and, therefore, can be very sought-after by investors. Here are the basics of how to buy municipal bonds. 

Initial Offering

Municipal bonds can be purchased directly from the entity that is issuing them: city governments, county governments, school districts, airports, and seaports. The downside to this approach is that these municipal bonds are issued only when such entities need to fund a project. Therefore, their offerings tend to be sporadic.

Secondary Market

If you do not want to wait for new municipal bonds to be issued, you can always buy them on the secondary market. This involves buying the bonds directly from a broker. There are about 2000 registered dealers in the United States that can sell municipal bonds. They actually own the municipal bonds that they are selling. There is no centralized bond exchange as if this were the stock market. You are working on an individual basis with the brokers that own the bonds.  

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