Bond vs. Fixed-income Stocks vs. Stocks & tax implications

Bond and Fixed-income Stocks

(Please read the Disclaimer first. If you disagree, please stop reading my blog).

GENERAL OBLIGATION BOND – GO BOND

• General obligation bonds are issued with the belief that a municipality will be able to repay its debt obligation through taxation or revenue from projects. No assets are used as collateral.
• Moderate fixed dividend at 4.5-5.5% per year depending upon the bond you bought
• GO bond dividend is tax-exempt for both Fed and State
• Buy GO bond directly through the broker, not public market, higher commission
• Buy GO bond ETF which is the same as the stock trading at much lower commission
• stock symbols for Muni bond: BFZ, PZC, (fed and state tax exempt), MHD and MCA (may not be 100% state tax free) 5.5-6% dividend per year, buy and sell easily

Fixed-income stocks

• 6.5-8% dividend per year
• Regular stock purchase commission, buy and sell easily
• pay the dividend tax
• stock symbols: HPS, HTD

Stock Investment

• Buying individual stocks is risky and time-consuming to trace and do the research
• Risk management is hard to control
• Buying some ETFs and mutual fund is either lower return or not diversified
• A good stock investment model is proved successful by the history data:
• 50% TLT + 50% QQQ (some people may add GLD)
• More than 10% annual return in the past 10 years

Tax on capital gains, dividends, and interests.

	Capital gains	Others
Stocks	·          ·         Short-term capital gains are taxed at the investor's ordinary income tax rate. ·         Long-term capital gain: Tax rate is 0% for the 10%–15% brackets; 15% for the 25%–35% brackets; and 20% for the 39.6% bracket.	Qualified dividend: Tax rate is 0% for the 10%–15% brackets; 15% for the 25%–35% brackets; and 20% for the 39.6% bracket.
Bonds	Bonds’ capital gains are treated same as stocks’ capital gains.	The income from taxable bond funds is generally taxed at the federal and state level at ordinary income tax rates in the year it was earned.