What shouldn’t you do as the Federal Reserve tightens policy? You shouldn’t be passive. Passive muni investors suffer from the painful phenomenon of clipped wings. That’s when passive strategies can’t rapidly reinvest in higher-yielding securities as rates climb, unlike their more nimble, actively investing cousins.
On the surface, passive municipal ladders seem like a sensible investment. Simple. Easy. Cheap. But the numbers don’t lie.
Looking for a strong defense against rising US interest rates? Look no further.