In our experience, investors have many reasons for amassing a large cash position but generally one reason to wonder about diversifying their cash position: They are seeking a higher total return than the all-cash position can provide.

 

These investors may wish to hold onto a portion of their cash positions but may wish to consider a strategy of investing a portion of their cash assets into short- or limited-term municipal securities. These types of strategies have the potential to improve the net total return of a portfolio because the income generated by muni securities is exempt from federal income taxes and, in some instances, from state and local income taxes, too. Our infographic shows two of the various strategies for diversifying with muni investments.

 

Munis and cash (or cash alternatives) don’t have identical risk profiles, of course, but investors with a preference for cash may be pleasantly surprised to discover that short- and limited-term muni bonds have historically exhibited far less price volatility and duration risk than longer-term munis.

 

Of the 20 Oppenheimer Rochester municipal bond funds, 5 have specific average effective maturity (AEM) targets:

Investors, we believe, will appreciate what these funds have in common. All can provide a compelling tax-free income stream and diversification benefits. These funds have historically offered higher yields than individual municipal bonds and highly competitive yields versus peer funds. Like our 15 longer-term funds, these 5 are consistently reviewed by our risk management professionals and managed based on an investment approach we call the Rochester Way.

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Infographic Can You Shift (A Portion) of Your Assets from Cash to Munis?