Municipal bonds offer investors a powerful combination of tax-advantagedincome and portfolio stability. These securities allow you to earn steadyreturns while supporting essential public projects in communities acrossAmerica. If you're exploring fixed income investments for the first time,understanding municipal bonds can transform your approach to building wealth.
Municipal bonds are debt securities issued by state and local governments to fund public projects. When you purchase a municipal bond, you lend money to agovernment entity. The issuer promises to pay you regular interest payments and return your principal when the bond matures.
Your returns come from two sources. First, you receive periodic interest payments, usually every six months. The interest rate, called the coupon rate,remains fixed for most bonds throughout their life. Second, you get youroriginal investment back at maturity, assuming the issuer fulfills its obligations.
Municipal bonds span different time horizons. Short-term securities maturein one to three years. Intermediate bonds typically mature in three to ten years. Long-term bonds can extend 20 to 30 years. Your investment timeline and income requirements determine which maturity suits your financial goals.
The bond's face value, typically sold in $5,000 increments, represents theamount you'll receive at maturity. Between purchase and maturity, you collect interest income that can provide steady cash flow for your needs.
Municipal bonds are debt securities issued by state and local governments tofund public projects. When you purchase a municipal bond, you lend money to agovernment entity. The issuer promises to pay you regular interest payments andreturn your principal when the bond matures.
Your returns come from two sources. First, you receive periodic interestpayments, usually every six months. The interest rate, called the coupon rate,remains fixed for most bonds throughout their life. Second, you get youroriginal investment back at maturity, assuming the issuer fulfills itsobligations.
Municipal bonds span different time horizons. Short-term securities maturein one to three years. Intermediate bonds typically mature in three to tenyears. Long-term bonds can extend 20 to 30 years. Your investment timeline andincome requirements determine which maturity suits your financial goals.
The bond's face value, typically sold in $5,000 increments, represents theamount you'll receive at maturity. Between purchase and maturity, you collectinterest income that can provide steady cash flow for your needs.
Every investment carries risks, and municipal bonds require carefulevaluation before you commit capital. Understanding three primary riskcategories helps you make informed decisions.
Credit risk represents the possibility that the issuer won't make timelyinterest payments or return your principal at maturity. While municipal bonddefaults remain relatively rare compared to corporate bonds, they do occur.Rating agencies like Moody's, Standard & Poor's, and Fitch evaluate issuercreditworthiness and assign ratings. Bonds rated AAA, AA, or A are consideredinvestment grade with strong credit quality. Lower-rated bonds carry higherdefault risk but offer higher yields to compensate investors.
According to research from Moody's, only 115 municipal bond defaultsoccurred between 1970 and 2022. General obligation bonds showed even strongerperformance, with just twelve defaults during this period. These statisticsdemonstrate the relative safety of investment-grade municipal bonds compared toother asset classes.
Interest rate risk affects all bonds. When interest rates rise, existingbond prices fall. If you need to sell your bond before maturity, you mightreceive less than you paid. A bond purchased at par value for $10,000 mighttrade at $9,500 or $9,000 if rates move higher. Longer-maturity bondsexperience greater price volatility when rates change. This risk diminishes ifyou plan to hold bonds until maturity, when you'll receive the full face valueregardless of interim price movements.
Liquidity risk concerns your ability to sell bonds quickly at fair prices.Some municipal bonds trade actively with narrow bid-ask spreads. Others seeminimal secondary market activity, particularly smaller issues or bonds fromless-known issuers. You might face challenges selling these bonds withoutaccepting a discounted price. OneOak Capital Management addresses this concern through its extensive networkand relationships in primary and secondary marketplaces.
Market conditions also influence municipal bond values. Economic downturns,changes in tax policy, or local fiscal problems can impact bond prices andissuer creditworthiness. A city facing budget shortfalls or a state withdeclining revenues might see its bonds trade at lower prices. Diversificationacross multiple issuers, geographic regions, and sectors helps manage theserisks effectively. Learn more about how the firm approaches these challenges onthe riskmanagement page.
Municipal bonds occupy a unique position among fixed income options.Understanding how they stack up against alternatives helps you determine theirrole in your portfolio.
Corporate bonds typically offer higher nominal yields than municipal bonds.A corporate bond might pay 5 percent while a comparable municipal bond pays 3.5percent. However, corporate bond interest faces full taxation at ordinaryincome rates. After accounting for taxes, the municipal bond often deliverssuperior after-tax returns for investors in higher tax brackets.
Corporate bonds also carry higher default risk than most investment-grademunicipal bonds. Corporate bankruptcies and restructurings occur morefrequently than municipal defaults. The protection of government taxingauthority or dedicated revenue streams makes municipal bonds relatively safer.
Treasury securities provide the ultimate safety with full faith and creditbacking from the federal government. Default risk is essentially zero. However,Treasury yields usually fall below municipal bond rates. A 10-year Treasurymight yield 4 percent while a comparable municipal bond offers 3.5 percenttax-free. The municipal bond delivers better after-tax returns for investors inthe 24 percent bracket or higher.
Treasury interest is federally taxable, though exempt from state and localtaxes. This partial tax benefit doesn't match the advantages of municipal bondsfor most investors.
Certificates of deposit offer FDIC insurance up to $250,000 but generatefully taxable interest income. CDs work well for conservative investors seekingguaranteed returns with no market risk. However, yields on CDs often lag behindmunicipal bonds, particularly when you consider the tax advantages. A CD paying4 percent taxable provides less after-tax income than a municipal bond paying3.2 percent tax-free for investors in the 22 percent bracket or higher.
High-yield municipal bonds, sometimes called junk munis, offer significantlyhigher interest rates than investment-grade issues. These bonds come fromissuers with lower credit ratings or more speculative projects. The increaseddefault risk and price volatility make them suitable only for experiencedinvestors who understand the trade-offs. One Oak Capital Managementfocuses on investment-grade securities that balance attractive yields withmanageable risk.
New investors face several entry points into the municipal bond market. Eachapproach offers distinct advantages and trade-offs.
Individual bonds require larger minimum investments, typically $5,000 to$25,000 per bond. Building a diversified portfolio of individual bonds demandssubstantial capital and expertise in credit analysis. You need to evaluate eachissuer's financial condition, understand the bond's structural features, andmonitor ongoing performance. Financial advisors recommend holding at least 10different bonds from issuers with different credit characteristics to achieveproper diversification.
Municipal bond mutual funds pool money from many investors to purchasediversified bond portfolios. You gain instant diversification and professionalmanagement with smaller initial investments, often as low as $1,000 or $2,500.Fund managers handle the research, selection, and monitoring of individualbonds. They also manage reinvestment of interest payments and matured bonds.However, you pay ongoing management fees that reduce your net returns,typically 0.50 percent to 1.00 percent annually.
Exchange-traded funds offer another route into municipal bonds. These fundstrade on stock exchanges like individual stocks, providing flexibility andtypically lower fees than mutual funds. You can buy and sell throughout thetrading day at market prices. ETF expense ratios often range from 0.07 percentto 0.35 percent, lower than most mutual funds. However, ETFs trade at marketprices that can differ from their net asset value, creating small premiums ordiscounts.
Separately managed accounts work well for high-net-worth investors withsubstantial assets to invest. A professional manager builds a customizedportfolio of individual bonds based on your specific tax situation, risktolerance, and income needs. You own the individual bonds directly, providinggreater control and transparency. The manager can implement tax-loss harvestingstrategies and customize maturity schedules to match your cash flowrequirements. Explore One OakCapital Management's SMA strategies to see how this approach works inpractice.
One Oak Capital Management specializesin delivering institutional-quality fixed income solutions to individualinvestors. Founded in 2013 and based in Purchase, New York, the firm operatesas an SEC-registered investment adviser with deep expertise in municipal bondmarkets.
The firm's approach centers on capturing value opportunities ininvestment-grade municipal bonds through active management and disciplined riskmanagement. One Oak Capital Management employs strategies typicallyavailable only to large institutional investors, making them accessible toqualified individuals.
Stephen DiTursi,CEO and Chief Investment Officer, brings 40 years of industry experience to thefirm's leadership. His background includes senior fixed income roles at majorfinancial institutions where he directed trading, sales, and capital marketsoperations. Before founding One Oak Capital Management, Stephen served as Headof Fixed Income Trading and Sales at Stone & Youngberg and held positionsat JVB Financial Group, Morgan Keegan, and Gruntal & Co. His expertisespans portfolio risk management, credit analysis, and trading strategies acrossmarket cycles.
Neil Crabb,Senior Portfolio Manager with 34 years of experience, oversees the municipalresearch process and trading systems. His track record includes successfultenures at Southwest Securities (now Hilltop Securities) and AssociatedBrokers, where he consistently ranked as a top-producing municipal salestrader. Neil's experience as a U.S. Marine Corps combat veteran in OperationDesert Storm brings discipline and focus to portfolio management.
The investment teamevaluates each bond's credit quality, yield characteristics, and tax benefitsto construct portfolios aligned with your objectives. Whether you seek absolutereturns or high tax-free income, the firm structures strategies around yourspecific needs.
The EnhancedMunicipal Portfolio demonstrates the firm's capabilities. This laddered,actively managed strategy capitalizes on inefficiencies in the municipalmarket. The portfolio consists of diversified, high credit quality bondsdesigned for investors seeking tax-advantaged income. Performance results showthe strategy's effectiveness, with the Enhanced Municipal Portfolio earningZephyr's PSN Top Gun award for top 10 returns in the PSN Municipal Universe formultiple time periods.
For investors in taxable accounts who want broader diversification, the EnhancedTaxable Municipal Portfolio combines municipal bonds with corporate bonds.This approach seeks attractive taxable income and total return through exposureto multiple fixed income sectors. The strategy has also earned PSN Top Gunawards, demonstrating consistent performance.
The EnhancedShort-Duration Municipal Portfolio targets investors seeking low volatilityand attractive tax-advantaged yields. This laddered strategy focuses on shortduration, high credit quality bonds appropriate for investors with shorter timehorizons or lower risk tolerance.
For qualified clients seeking absolute returns, the MunicipalOpportunities Portfolio captures relative value opportunities within theinvestment-grade municipal market. This alternative credit strategy aims togenerate returns uncorrelated to traditional fixed income while maintaining adisciplined risk management framework.
Risk management remains central to the firm's investment philosophy. Theteam continuously monitors portfolio positions, adjusts holdings based onchanging market conditions, and maintains disciplined selling criteria. Thissystematic approach aims to protect your capital while generating consistentincome.
Joseph Marren,Head of Research with 49 years of industry experience, oversees the firm'sresearch strategy across all sectors and asset classes. His extensivebackground includes 23 years in senior roles leading business developmentwithin the M&A departments of Citigroup, Credit Suisse, and other majorinstitutions. Joe previously served as President, CEO, and Chief InvestmentOfficer of KStone Partners, a firm specializing in managing funds-of-hedgefunds focused on municipal securities.
James Kim, Senior Portfolio Manager, brings 18 years of experience to theinvestment team. His background includes serving as CIO and Chairman of theInvestment Committee for Alternative Capital Advisers and as Senior ResearchAnalyst at Terrapin Asset Management. James's expertise spans alternativeinvestments, hedge fund due diligence, and portfolio allocation across multiplestrategies.
Joanne Costantini, CFO and Chief Compliance Officer with 30 years ofindustry experience, ensures strict adherence to regulatory requirements andoversees investment reporting. Her role encompasses managing relationships withregulatory and compliance bodies, client onboarding, and implementation ofadministrative activities. This attention to compliance and transparency givesyou confidence in how your investments are managed.
The firm provides comprehensive client service through its operations team.You receive regular performance reporting, transparent fee structures, andresponsive communication. One Oak Capital Management structures portfolios as separatelymanaged accounts, meaning you own the individual bonds directly. Thisprovides tax efficiency through strategies like tax-loss harvesting andcomplete transparency into your holdings.
Starting your municipal bond investment journey requires carefulconsideration of your financial situation. Assess your current tax bracket todetermine how much value you'll receive from tax-exempt interest. Investors inthe 24 percent federal bracket or higher typically benefit most from municipalbonds. State income taxes amplify the advantages for residents of high-taxstates like California, New York, New Jersey, and Massachusetts.
Review your overall portfolio allocation to decide what percentage should gointo municipal bonds. Financial advisors often recommend allocating 20 percentto 40 percent of fixed income holdings to municipal bonds for investors inhigher tax brackets. Your specific allocation depends on your tax situation,risk tolerance, and income needs.
Consider your income needs and when you'll need access to your principal.Municipal bonds work well for investors seeking steady income with lowervolatility than stocks. The tax-free interest payments can supplementretirement income, fund college expenses, or provide cash flow for other goals.Building a bond ladder with staggered maturities ensures regular access toprincipal as bonds mature.
Working with experienced professionals simplifies the process and helps youavoid common pitfalls. The fixed income specialists at One Oak Capital Management bringextensive market knowledge and access to a wide range of municipal securities.Their disciplined investment approach and institutional resources can help youbuild a municipal bond portfolio suited to your goals.
Municipal bonds deserve consideration as part of a well-rounded investmentstrategy. The combination of tax advantages, steady income, and relativelylower risk compared to stocks makes them valuable for many investors.Understanding the basics puts you in position to make informed decisions aboutwhether municipal bonds fit your financial plan.
You can explore the firm's SMAstrategies to see which approach aligns with your objectives. The firmserves accredited and qualified investors seeking professionally managed fixedincome solutions.
Contact One OakCapital Management to discuss how municipal bond investing might supportyour financial objectives. The firm's proven expertise in fixed income marketsand commitment to personalized service can help you navigate this importantinvestment category with confidence. The team's institutional-grade strategies,disciplined risk management, and focus on tax-advantaged income make them avaluable partner for investors seeking to optimize their fixed incomeallocations.
