Municipal Bonds: Municipal Bond Funds from Bond Broker Charles Schwab

Municipal Bonds

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Municipal bonds are one of the few remaining tax breaks available to investors. In today's market, few investments offer such an appealing combination of tax-free returns, relative safety, and convenience.

What are municipal bonds? | Benefits of municipal bonds | Why buy municipal bonds at Schwab?

What are municipal bonds?

Municipal bonds are debt securities issued by state and local governments and their agencies. The interest they pay is free from federal taxation and sometimes state and local taxes.¹ Coupon municipal bonds pay interest semi-annually and promise to return your principal when they mature. They can be an attractive investment choice for investors in higher tax brackets, since after-tax yields may be greater than yields on alternative taxable investments. For municipal bonds, the minimum investment is $5,000 (subsequent increments of $5,000).

As a broker, Schwab also offers municipal bond funds and unit investment trusts (UITs) that give you the opportunity to invest with a smaller initial investment.

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Benefits of municipal bonds

Tax-free income
Interest income is exempt from federal income tax—and if the bonds are from your home state, interest may also be exempt from state and local taxes.¹

Dependable income
Coupon municipal bonds pay interest twice a year, so you know exactly how much to expect and when you'll receive it.

Preservation of capital
Issuers promise to repay the full face value upon maturity. And buying insured municipal bonds can further add to the security of your investment. By holding insured municipal bonds to maturity, you limit the risk to your principal.

Consult with your tax advisor concerning your particular situation. You may receive more or less than your original investment when selling a Fixed Income Security. The value will depend on its market price in the secondary market.

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Why buy municipal bonds at Schwab?

Schwab also offers municipal bond funds and unit investment trusts (UITs) that give you the opportunity to invest with a smaller initial investment.

To learn more, call a Schwab Bond Specialist™ at 888-621-4355.

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Investors should consider carefully information contained in the prospectus, including investment objectives, risks, charges and expenses. You can request a prospectus by calling 800-435-4000. Please read the prospectus carefully before investing.

1. Income may be subject to the alternative minimum tax (AMT).

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Suggested next steps:

New to Schwab?
Call 866-855-9104 to learn about fixed-income investing.

Already a Schwab client?
Call 888-621-4355 to talk to a Schwab fixed-income specialist.