In tough economic times, your financial planning may seem to be a futile attempt to stem losses instead of increasing gains. It’s nice to know that even when most investments are going south, from housing to the stock market, you can still count on municipal bonds to protect your principal while giving you some steady gains. And, the fact that they are at bargain basement prices can even sweeten the deal.

The need for municipal bond insurance too is in question. This might make sense if the insurers were solvent, but many of them are the same people who insured the mortgage mess. In the final analysis, one shouldn’t bother with municipal bond insurance until things shake out in the greater market place. In order to hedge the risk, you can simply opt for low-cost and high quality municipal bonds instead. If your portfolio is diversified well enough, it can be a great way to stash some money away and still feel somewhat safe. A default on any one bond will have much less impact that way.

Finally, using this strategy, one can make greater gains on the investment than putting the money in treasury securities – even though, that hasn’t been the case historically, because they are not free from Federal taxes now, unlike in the past. When you compare the returns on municipal bonds, including the tax costs, you may find that municipal bonds become far more attractive for the near future. After all is said and done, you might make out with a 5% yield on the investment without much risk. In today’s collapsing markets, that’s one of the better deals around. It’s not stellar, but it also won’t have you lying awake at night wondering if the price of oil, the housing mess, or credit crunch is going to derail your investments.

This is not a substitute for professional financial advice. Seek the guidance of a finance professional if you need help with financial advice.