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Editor's note: We're wrapping up our series on the most important financial steps for you to take in 2014… As we noted, we believe our country is at a critical financial crossroads. To protect yourself and profit, you must understand how to take advantage of the biggest opportunities… and avoid the biggest dangers. Learn how to access ALL our best ideas on how to do that right here.
Top 2014 Money Moves:
Who Else Wants to Earn a SAFE 9% Yield?By
Friday, December 27, 2013
Where can I earn safe income on my savings?
For hundreds of thousands of Americans, this is the central investment question of our time.
We can't blame folks for asking this question...
After all, many people over 50 have spent decades earning and saving money. During those years, they were told they'd be able to earn plenty of investment income on their savings... and enjoy a comfortable retirement.
But thanks to record-low interest rates, that scenario isn't playing out as people expected...
Savings accounts yield next to nothing. Loan money to the federal government for 10 years, and you'll get less than 3% in annual interest. As for stocks, the broad market is yielding around 2%.
In other words, it's very hard to find safe, sizable investment income in conventional investments.
Fortunately, Stansberry & Associates' resident retirement expert Dr. David Eifrig has found a great solution for people who want to earn safe investment income.
The solution is municipal bonds.
Muni bonds are loans to local governments. Cities and states use the cash to build roads, schools, and so on. In exchange, they promise to send investors regular tax-free interest payments and pay off the loan in full at the end of a set period of time.
Since cities can raise taxes to pay off debts, municipal bonds rarely default. Despite the headlines you've read about Detroit, Harrisburg (Pennsylvania), and Puerto Rico, muni bonds are one of the safest places investors can put their capital.
According to Forbes, high-quality municipal bonds have had a default rate of only 0.017% over the past 40 years.
And as the economy slowly improves, states and cities will collect more tax revenue, which will help them pay muni-bond owners.
Finally, because the federal government wants to encourage folks to loan their money to state and local governments, you don't have to pay federal income tax (and often, you don't have to pay state income tax) on the interest you receive from munis.
Doc Eifrig says, "No matter how you slice it, municipal bonds belong in every income investor's portfolio."
He recommends owning a "basket" of these bonds through closed-end funds. Unlike, say, mutual funds, closed-end funds have only a set amount of shares. When folks are excited about the assets the fund holds, those shares can trade at a premium. And when folks are scared, like they are now, those shares can trade at a big discount...
Take NIO, for example. It's a fund we recommended in my DailyWealth Trader service.
NIO holds a basket of over 400 loans made to municipal agencies that manage things like toll roads in Orange County, California, water distribution in North Central Texas, and operations of the New Jersey Turnpike. Over the last year, the share price is down 21% (a big move for a bond fund). And recently, it was trading at a huge, 8.4% discount to the value of its assets.
 NIO's average discount over the last 10 years is about 5%. If it simply returns to that level, you'll pocket a 3.7% gain.
Plus, at the current price, NIO yields nearly 7%. If you're in the 28% tax bracket, that's like earning 9.6% on a taxable investment.
If you're looking for safe retirement income in a "zero percent" world, consider a municipal bond fund like NIO.
Good investing,
Brian Hunt
Further Reading:
"If you've earned and saved your whole life and would like to earn income on those savings, stop shortchanging yourself," Doc writes. "You can earn nine times more interest on your savings" with muni-bonds. Get all the details here: How to Legally "Opt Out" of Federal Income Taxes.
By crunching just a few numbers, Doc can pinpoint the best times to buy muni bonds for capital gains... and higher yields. "Over the last six years, buying with my method increased your yield by 8%... and boosted your short-term capital gains more than five times over," he writes. Learn how Doc does it here: How to Earn Extra Returns on the World's Safest Income Investment.
Market NotesJUST THE PROMISE OF EXPORTING NATURAL GAS... We're counting down the final days of 2013 with "shale week" in Market Notes. Each day, we're looking at a different facet of the huge North American oil and gas boom... and how it's shaping our world.
In the 1970s, the U.S. government banned the export of crude oil... It's a regulation that's still in effect today. And all other energy exports have been tightly controlled. Until recently, almost nobody was thinking about exporting energy.
But as we showed you on Tuesday, the United States is now producing more natural gas than ever before. We're producing so much natural gas now that the infrastructure doesn't exist to store or transport it... So it's being lit on fire, or "flared."
In 2010, Cheniere Energy was the first company to get a liquefied natural gas export license. The company was originally formed to import gas... But after new technologies released enormous domestic gas supplies, the company switched gears. Cheniere estimates it will start exporting liquefied natural gas in late 2015... And shares have raced 413% higher in anticipation.
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