MuniBuyers.com

Why Individuals Should NEVER Buy Individual Municipal Bonds

Individuals should never buy municipal bonds or any bonds in any other form
than a bond fund.

While this is a rather broad statement, changes in the municipal,
corporate, and government bond markets in the last 5 years have clearly put
the individual bond buyer at a huge disadvantage, and frankly, a target for
unscrupulous bond dealers and the regulatory agency, FINRA.

To explain this, perhaps I should start with how the bond markets work. To
put it as simply as possible, most bonds do not trade on an exchange, so
their pricing is up to interpretation by the individual bond dealer who is
contacted to sell the bond. In your case, lets say you want to sell a bond
you bought from your Merrill Lynch broker. Most likely, you will contact
your broker at Merrill Lynch and tell him you want to sell and he will, in
turn, ask his trading desk for a bid. Since there are essentially NO
exchange for bonds, the Merrill Lynch bond desk will decide that either they
want to A: bid the bond (put a price on it) or B: put it to the street for a
bid (send the bond to a list that many brokers see if of them will bid it).

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