https://www.watkinsoncap.com/watkinson-capital
advisors/blog/1066/MuniBond_Yields_remain_at_15_year_High_Investor_Sentiment_remains_low
The bottom line is that the retail investor has shown up
late to the party that has been rallying in MuniLand since November 1st
2023.
It is also worth noting that the
#MuniBondMutualFunds faced challenges in the previous years, experiencing
outflows in 2022 and 2023 as a result of the Federal Reserve's aggressive
interest-rate hikes and panicked selling.
It is our strong professional opinion
that investing in MuniBonds via a mutual fund is insane
because an investor's capital is exposed to additional risks with the mutual fund structure. While the investor gets instant diversification and expert management with little capital, they also get the following risks:
- The biggest additional risk is an investor's capital can be negatively impacted by the selling behavior of the other retail investors in the mutual fund. This is not theoretical because recent history has seen massive panicked selling in 2011 induced by Meredith Whitney's 60 Minutes interview and in March 2020 with the Covid Lockdown.
- These two historical examples of sudden big money sell orders overwhelmed the municipal bond market, as there were not enough buyers.
- #MuniBondFund Managers had to resort to slashing prices to fire-sale levels to entice a buyer in order to raise capital to meet redemptions.
- Over a short period of time after the selling pressure abates, the municipal bond market returns as it always has, to a more normalized, balanced market place.
- However, by the time the #MuniBondMarket recovers, the #MuniBondFund has sold millions or even tens of millions of MuniBonds at fire-sale pricing and the fund suffers permanent NAV (net asset value) loss.
- Infinite maturities... there is no maturity with a mutual fund.
- #MuniBondClosedEndFunds is levered insanity.
The Separately Managed Account (SMA) structure
eliminates this risk.
Do not get in the retail boat captained by retail investors.
Best,Jeff Watkinson
#WatkinsonMuniBonds
#WatkinsonMunicipalBonds #GetRealStayRich #MunicipalBondSMA #Yield