Make a Quick Buck Off Putnam's Purchase

He highlights four Putnam funds that could be worth a look. With (PMG Quote)Putnam Municipal Bond, you were paying just 92 cents per dollar of assets at last count. The fund has $13.61 worth of munis per unit, but those units were trading for just $12.50.

Municipal Bond has a pretty plain-vanilla municipals portfolio. About half the bonds are AAA-rated. Nearly four-fifths are A-rated or better. And the portfolio is concentrated toward the short end of the yield curve. Just 7% of the fund is invested in munis that have a 10-year duration or longer.

Does that matter? Only if you think we may see more inflation down the pike than the market is currently expecting. You can count me in.

Savvy Savings

Bonds are like bank accounts that can never raise their interest rates. So if inflation rises over the next, say, 10 years, someone holding a 30-year bond is going to get the shaft. Back in the hyperinflationary 1970s, long-dated bonds collapsed. Who wants to buy a 5% fixed yield when inflation is running at 10% and the bank will pay you 12%?

The great advantage of municipal bonds is that their interest is free from federal income tax. At current prices, Municipal Bond's monthly dividends add up to an annual yield of 4.84%, tax free. If you're in the top federal tax income bracket, you'd need to earn 6.72% before tax to get that kind of deal.