The Stewardship of Wealth: Successful Private Wealth Management for Investors and Their Advisors, + Website

Notes

¹ Duration is a more accurate measure of the interest rate sensitivity of a bond portfolio than the more commonly used “maturity,” because duration includes all cash flows coming in from the bond, including interest payments and principal repayments. Thus, a bond with a ten-year maturity and a 5 percent yield will have a much shorter duration (and hence will be much less susceptible to interest rate changes) than a bond with a ten year maturity and a 3 percent yield.

² Eric Jacobson, “Still a Leader Worth Following,” Morningstar Fund Analysis, (February 10, 2012) available at http://analysis.morningstar.com/analystreport/far.aspx?t=PTTDX&region=USA.

³ Commissions on the purchase of U.S. Treasury securities are very small, and can be avoided altogether by using the Treasury Direct program. Because we are planning to hold all our bonds until they mature, there will be no commissions on sales.

⁴ Deflation is not to be confused with disinflation, a propitious condition in which the rate of inflation is declining.

⁵ The Obama administration has proposed to tax municipal bond interest.

⁶ As this chapter was being written, both Harrisburg, Pennsylvania and Jefferson County, Alabama (Birmingham) had declared bankruptcy.

⁷ The guidelines will also give tax information about the investor. While most municipal bond investors will be in the highest federal and state tax brackets, family investors increasingly fall under the provisions of the Alternative Minimum Tax. AMT taxpayers will ...