Build America Bonds

Perhaps you have heard about the Build America Bonds and have wondered if they would work as an investment for you?

Generally they would not, at least not yet. The first reason is that there is no active seconday market (meaning once you buy, selling would be a real issue). The second reason is that these bonds are generally long i.e., the maturity is 20 to 30 years. This is too long for the typical individual investor (10 years is about the maximum you should do).

The good news about these bonds is that they compete with other taxable bonds, corporate bonds in other words, but generally have far less default risk than corporate bonds. So good interest rates with lower default risk.

If a viable secondary market materializes and if shorter maturities are sold, then perhaps Build American Bonds would become attractive for individual investors.