Stock market is considered very risky for investors. There are other alternatives such as bonds. Bonds backed by the state government are very safe and have some the highest rating accorded to them by the agencies.
Now there are states which issues bonds like the state of California issues the California Tax Free Municipal bonds and these are secured by the State government of California. That will mean no matter what will happen the principal and the interest are safe as they are backed the state.
Muni bonds offer the benefit that it will be easy to get the safety into your portfolio. California government is under the stress because of huge deficits so be careful while investing. Overall the belief is that these are the one of very safe instruments for investment. There are a lot of states that offer these bonds apart from California.
If you live in Arizona then invest in Arizona stat bonds as you will not be liable to pay any state taxes. This is because of the fact that these investments are no longer tax free for residents of other states. It implies that the State tax will have to be paid by you but there will be no Federal tax.
Always spread your risk and that is good for your investments. Diversify so that some part is in municipal bonds. For higher gains you should invest some part in the stock market and you should have some part on the savings account.
You can make more money with bonds when you have a diversified portfolio. Diversification is essential to make sure that when something happens to the stock market you have other avenues where the investment income can be from. This is in effect the spreading of your risk portfolio. Always make sure that you invest in these bonds for safety factors.
The author suggests diversification using California tax free municipal bonds and independent broker dealers
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