Master Schwab: The Ultimate Step-by-Step Guide to Buying New Issue Municipal Bonds

 

Hello Members and Super Savers!

I hope you're healthy and well. In today's video, I'll be walking you through how to buy a new issue municipal bond step by step on Schwab.

Introduction and Background

Video Purpose and Viewer Request: When we posted our "How to Buy Mun on Fidelity" video on LinkedIn, the majority of comments requested a Schwab tutorial. As some of you know from our previous video, we anticipated higher rates and canceled our order. But today, you’ll learn not only how to buy but also how to cancel an order if needed.

Comparison with Other Platforms: Schwab, like Fidelity, does not charge a fee for purchasing new issue municipal bonds online. For Vanguard users, note that Vanguard only offers individual municipal bonds via the secondary market.

Understanding Municipal Bonds: If you're new to municipal bonds or need a refresher, check out our intro videos linked below. Not all municipal bonds are automatically free from federal, state, and local income tax.

Steps to Buy a New Issue Municipal Bond on Schwab

Logging In and Navigating Schwab’s Platform

• Log into your Schwab account. From your dashboard, click on "Research" and select "Bonds, CD, and Fixed Income" from the pull-down menu. This will take you to the Bonds, CDs, and Fixed Income Investments page.

Exploring Available Municipal Bonds

• Scroll down to view municipal bonds with different credit ratings and maturities. Munis generally offer lower yields than corporate bonds due to their tax-exempt status.

Understanding Tax Implications

• Learn the tax implications of munis versus corporate bonds. Note that some munis are taxable at the federal level and may also be subject to AMT (Alternative Minimum Tax).

Finding New Issue Munis

• Click on "New Issue Municipals" to see available new issue munis. You can sort by state and review the order-taking periods.

Checking Offering Details

• Review the offering type (negotiated or competitive) and the expected maturity range, ratings, and offering size.

Understanding Offering Types

• Learn the difference between negotiated and competitive offerings. A negotiated offering involves selecting an underwriter, while a competitive offering involves bidding.

Reviewing the Preliminary Offering Statement (POS)

• Click on the POS link to review the document. This includes crucial information about the offering, such as how the funds will be used and the tax treatment.

Placing the Order

• Select the muni you wish to buy. Enter the purchase amount (minimum $5,000 face value). Choose between a market order or limit order and select "All or None" or a specific quantity. Review and place your order.

Order Confirmation and Follow-Up

• Check the order confirmation screen and wait for an email about the status of your order. If the muni is in high demand, you may receive an email about changes in terms or prices.

Canceling an Order

• If you decide to cancel, contact Schwab as soon as possible. They will attempt to cancel the order on a best-efforts basis.

Conclusion

• Additional Resources and Advice: Municipal bonds can be complex. For further understanding, refer to our introductory videos. Consider discussing with your tax or financial advisor if municipal bonds fit your portfolio.
• Call to Action: If you have questions or need more information, drop a comment below. If you found this video helpful, support our channel through membership. Join our next Live Q&A on November 17th at 5:30 p.m. Eastern Time.

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