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CONTRIBUTORS

Rick Polsinello, CIMA®

Senior Market Strategist,
Franklin Templeton Institute

Lukasz Labedzki, CFA

Senior Analyst
Franklin Templeton Institute

Key takeaways

We believe that the current market conditions are favorable for tax-free municipal bonds, and that their characteristics warrant a place in most retail investors’ investment portfolios.

  • Municipal bonds offer the appeal of relatively high tax-exempt income.
  • This subsector of fixed income historically has also offered high-credit quality relative to other sectors.
  • Muni bonds can act as an important diversifier for equity allocations.

Read the full paper to explore these themes as well as recent issuance trends in the municipals sector.

WHAT ARE THE RISKS?

All investments involve risks, including possible loss of principal.

The allocation of assets among different strategies, asset classes and investments may not prove beneficial or produce the desired results.

An investor may be subject to the federal Alternative Minimum Tax, and state and local taxes may apply.

Fixed income securities involve interest rate, credit, inflation and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed income securities falls.

Low-rated, high-yield bonds are subject to greater price volatility, illiquidity and possibility of default.

To the extent the portfolio invests in a concentration of certain securities, regions or industries, it is subject to increased volatility.

IMPORTANT LEGAL INFORMATION

This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. All investments involve risks, including possible loss of principal. There is no guarantee that a strategy will meet its objective. Performance may also be affected by currency fluctuations. Reduced liquidity may have a negative impact on the price of the assets. Currency fluctuations may affect the value of overseas investments. Where a strategy invests in emerging markets, the risks can be greater than in developed markets. Where a strategy invests in derivative instruments, this entails specific risks that may increase the risk profile of the strategy. Where a strategy invests in a specific sector or geographical area, the returns may be more volatile than a more diversified strategy.

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If you would like information on Franklin Templeton’s retail mutual funds, please visit www.franklinresources.com to be directed to your local Franklin Templeton website.

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