Investing is a tricky business. You never know whether your investment is going to go up or down. Even with a triple tax-exempt fund, you're still going to be taking some kind of risk, so it's better to be informed.
How to Invest in a Triple Tax-Exempt Fund
Know what a triple tax-exempt fund is. A triple tax-exempt fund is an investment that is exempt from taxes on all three levels. Those levels are federal, state and city taxes.
Know what kinds of investments are triple tax-exempt. Usually, these are municipal bonds, which the government issues to raise money for improvements.
Understand municipal bonds. Sometimes called munis, these bonds promise to pay interest for a fixed amount of time. When that time is up, the principal gets repaid to you.
Learn that people like munis because they aren't taxed on the interest they earn. The interest is lower than you could get on other securities, though, because of the tax break.
Determine whether munis are a good choice for you. Do you want to reduce your taxes? Figure out whether the tax break is big enough to offset the low interest rate.
Buy municipal bonds through a broker or as a money market account from your local bank.
- The interest rate stays the same through the life of the bond, so if interest rates rise, you're stuck with it.
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