I once practiced in an office building where a large legal firm was right next door. A few times I would have casual conversation with the attorneys. I remember one in particular who was wary of investing in the stock market. He had amassed a large portfolio of municipal bonds that he boasted about. He thought he had a secure financial future, and a guaranteed income tax free income stream from those bonds. I guess he never got the memo about being diversified to build wealth because his secure financial future is about to come apart.
JPMorgan Chase & Co. CEO Jamie Dimon announced today that there have been six or seven municipal bankrupties and more are on the way. That means more defaults on municipal bond income. Diversification, folks- it’s for low risk not no risk.