Donnernv (< 20)

For Income Investors...a Foundation Stone

November 29, 2009 – Comments (3) | RELATED TICKERS: NQU

There are some of us FOOLS who choose to invest for income.  If you believe that medium-to-long term the market will make little progress, income investing may be a part of your coping strategy.

In that regard, I have a significant RL position in NQU, the Nuveen Managed Municipal Bond portfolio ETF.  I certainly have no expertise in evaluating munis for risks.  Nuveen does.  I'll pay their management fee for that expertise.

NQU yields about 6%, tax free.  Even Obama would not dare to attack the tax-free status of munis.  If you live in a tax-free state (I do), the income is virtually tax-free.  There may be taxes in your state (typically 3-7%) if you aren't so fortunate.

Of course, do your own due diligence, but I deem the risk to be small and the income high.  There are a lot of choices for investing given your macroeconomic outlook, but I believe NQU should be one of your foundation stones.

CONS:

U$D keeps sinking.  The asset value and income of your NQU holdings will not buy as many imported goods, particularly crude oil based products.  Commodities might provide a better payoff.

Interest rates rise.  Interest-based investments lose capital value.

Municipalities default on their muni obligations.  If not insured (most aren't), it's a YIKES event.

I believe these eventualities are relatively low probability, medium term.  Meanwhile, I'll cash the checks.