The bottom line on revenue bonds
Revenue bonds are one of the two major types of municipal bonds, although all are not created equal. Each bond offering is used to finance different projects that may have entirely different profitability prospects. While the risk of nonpayment is low, remember that revenue bonds are supported by the outcome of a specific project -- not by a municipality’s general revenue.
Investing in revenue bonds can make sense for those seeking predictable income and also for those who have some tolerance for price fluctuations. Additionally, revenue bonds offer tax benefits that may be of strategic assistance to people in high tax brackets. If you’re a more aggressive investor, equities or alternative investments may be more appealing to you.
Finally, revenue bonds exist to support communal infrastructure, which may give local investors additional incentive to lend their money. Everyone wants to live in a world with functioning roads, hospitals, and bridges. Acting as a catalyst to make these projects happen can be satisfying.
Some people may also find it rewarding to see their investment at work in real time, which can make revenue bonds an interesting choice for those heavily invested in the success of their state or local community.