Diversification of Municipal Investments

What this video covers

• Why concentration in a single issuer creates catastrophic credit risk, and why "buy more bonds" is never a correct diversification answer
• The three dimensions of true municipal diversification: geographical, type, and rating
• How mixing general obligation (GO) bonds, revenue bonds, and short-term notes spreads structural risk across a portfolio
• How blending AAA, AA, and A-rated bonds balances yield against safety
• The double risk of geographic concentration: loss of diversification protection plus loss of the in-state tax exemption when the investor relocates
• How a default or downgrade in one holding affects a concentrated portfolio versus a properly diversified one
• The classic exam scenario where an investor moves to another state and the impact on a single-state muni portfolio