Skip to main content
Add funds
Fund 1
Fund 2
Fund 3
Fund 4
Confirm your location and role
location select
language select
Municipal Bonds

Two is greater than one

Two swans in water

Since different asset classes involve different types of risk, diversifying your portfolio may help reduce overall portfolio volatility.1

A balance of equities and municipal bonds has historically lowered the overall investment risk (measured by standard deviation) and provided similar after-tax returns compared with an all-equity portfolio.

Over the 20-year period from 2004 to 2023, a portfolio of municipal bonds and equities provided comparable after-tax returns with similar or less risk than equivalent Treasury or corporate blends.

40% / 60% municipal/equity mix assumed less risk with similar return when compared with a 100% equity portfolio.
Combining asset classes

Assessing trade-offs among investments

Investments contain different sources of risk and return. Stocks can provide higher returns but also have greater volatility than municipal bonds. Municipal and corporate bonds include the individual credit risk of the borrower and the general interest rate risk of lower bond prices due to rising interest rates. Treasuries are backed by the full faith and credit of the U.S. government for the timely payment of principal and interest, but these securities are also subject to interest rate risk. Depending on an investor’s investment goals, risk tolerance, time horizon and tax implications, various portfolio considerations and allocations should be evaluated.

Greater Table v2

What does this mean at the state level?

As is typical in many states, realized capital gains are assumed to be taxed at the same rates as income. Due to the variation in state and local taxes, the impact on returns was not explicitly analyzed. The analysis assumed a 5% base state tax for both capital gains and income.6,7

After tax return

Related articles
Municipal Bonds Premium bonds
The potential benefits of purchasing premium bonds in a rising interest rate environment.
Municipal Bonds Municipal market: How rates rise matters
Analysis of five historical periods of increasing fed funds rates shows that various areas of the municipal yield curve responded differently depending on economic conditions, the shape of the curve moving into the tightening cycle and the manner in which the Fed tightened.
Municipal Bonds Investing in America
Municipal bonds help finance bridges, schools, hospitals and other projects to improve our communities. Investing in municipal bonds can provide investors with tax-exempt income.

1 Diversification does not insure against loss in a declining market.

2 Historical tax rates were obtained from the respective annual IRS Schedule X and are representative of those experienced by an investor who earned $100,000 in 2023 dollars throughout the period.

3 Interest income is still taxed at the individual’s income tax rate.

4 The Jobs and Growth Tax Relief Reconciliation Act of 2003 provided for capital gain and dividend tax relief to individual tax payers.

5 The maximum tax rate on capital gains and dividend income is 20% as of 31 Dec 2017 for the 39.6% tax bracket.

6 The Tax Cuts and Jobs Act of 2017 lowered the marginal ordinary income tax rate and capped state and local tax (SALT) deductions at $10,000, among other reductions.

7 Since state taxes are deductible from federal tax returns, the stated rate is slightly higher than the effective additional tax rate (state tax rate x [1 – federal income tax rate]).

This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy, sell or hold a security or an investment strategy, and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her advisors.

The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of market returns, and proposed or expected portfolio composition. Any changes to assumptions that may have been made in preparing this material could have a material impact on the information presented herein by way of example. Performance data shown represents past performance and does not predict or guarantee future results. Investing involves risk; principal loss is possible.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. For term definitions and index descriptions, please access the glossary on Please note, it is not possible to invest directly in an index.

This study is based on historical data gathered from sources we consider to be reliable and consistent. The methodology applied and results produced by this study indicate past investment performanceof market indexes over the 01 Jan 2004 – 31 Dec 2023 time period exclusively and in no way should be considered representative of the past performance of any investment product or predictive of future investment expectations and performancefor the municipal marketor investment products. Investorsshould consult with their professional advisors before making any tax or investment decisions.

Nuveen provides investment advisory services through its investment specialists.

This information does not constitute investment research as defined under MiFID.

Aerial view of the ocean shore

You are on the site for: Financial Professionals and Individual Investors. You can switch to the site for: Institutional Investors or Global Investors

You are about to access our website for visitors outside of the United States.

You are about to access our website for Nuveen Global Cities REIT

You are leaving the Nuveen website.

You are leaving the Nuveen website and going to the website of the MI 529 Advisor Plan, distributed by Nuveen Securities, LLC.

The Nuveen website for institutional investors is available for you.

You are about to access our website for visitors outside of the United States.

You are about to access our website for Nuveen Churchill Private Capital Income Fund (“NC - PCAP”)

Contact us
Contact us
Back to Top