Analysis and Diversification of Municipal Investments

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Chapters in this video

  1. 0:00 Carla's Florida hospital bond disaster
  2. 1:22 Credit risk versus event risk
  3. 1:47 The three dimensions of diversification
  4. 2:55 The home-state triple-tax-free trap
  5. 3:37 Why blend AAA with BBB bonds
  6. 4:22 Rapid-fire exam recap

What this video covers

  • Why concentrating in a single issuer, region, or bond type magnifies credit risk and event risk
  • The difference between credit risk (slow burn issuer deterioration) and event risk (sudden localized disaster)
  • Geographical diversification: spreading holdings across states to reduce exposure to one economy or tax base
  • Type diversification: mixing general obligation (GO) bonds, revenue bonds, and municipal fund securities to balance taxing power against project revenue
  • Rating diversification: blending AAA/AA bonds with A/BBB bonds to manage both safety and yield
  • The home-state triple-tax-free trade-off, and why the tax benefit does not erase geographic concentration risk
  • How sector concentration (for example, only hospital revenue bonds) creates its own distinct risk dimension

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