CONNECTICUT RESIDENTS CAN REDUCE IMPACT OF TAXES: COLONIAL ANNOUNCES NEW TAX-FREE FUND
CONNECTICUT RESIDENTS CAN REDUCE IMPACT OF TAXES:
COLONIAL ANNOUNCES NEW TAX-FREE FUND
BOSTON, Nov. 5 /PRNewswire/ -- Today more than ever, Connecticut residents are looking for ways to lower their tax burden. Now, Colonial Mutual Funds of Boston is introducing its newest fund, Colonial Connecticut Tax-Exempt Fund. This fund is designed to provide double tax-free income for Connecticut residents by investing mainly in investment grade Connecticut municipal bonds. Colonial Mutual Funds currently manages nearly $4 billion in tax-free assets for over 115,000 investors nationwide. Why Municipal Bonds?
Municipal bonds are one of the few tax-favored investments left after the Tax Reform Act of 1986. Their interest is exempt from federal income tax and is usually free from state tax where they are issued.
Under the new Connecticut income tax, a couple with a joint taxable income of just $34,000 would be in a combined state and federal tax bracket of 30.11 percent in 1992. In comparison to a fully taxable investment, a municipal bond with an assumed 6.5 percent yield would be comparable to a taxable investment yielding 9.30 percent. "Currently, you can't find a taxable investment yielding over 9.30 percent without significantly increasing your risk," said Jeffrey Augustine, portfolio manager of the Colonial Connecticut Tax-Exempt Fund. Why Connecticut Bonds?
Despite a few well-publicized downgrades, Moody's Investors Service reports that most of the general obligation bonds they rate for 142 Connecticut towns have maintained their rating over the last two years. In fact, Connecticut has three times as many cities in Moody's highest rating category as the national average. The new state income tax should lessen the state's vulnerability to economic downturns and stabilize revenues. This will further improve the credit quality of Connecticut's general obligation bonds. However, it is the taxpayer who must pick up the bill.
According to the Tax Foundation, the typical Connecticut resident must now work 139 days, from Jan. 1 until May 19 each year, just to pay state and federal income taxes. An investment in Connecticut municipal bonds or bond funds could lower the amount of income tax paid to both the state and the federal government. Who is the Municipal Investor?
According to Jeffrey Augustine, "The typical municipal investor usually exhibits four characteristics. These investors have a long-term investment horizon and are conservative, tax-sensitive (they have an individual taxable income over $20,400 or joint income over $34,000), and income-oriented."
Colonial's municipal bond funds use a somewhat different investment strategy than most other municipal bond funds. They are actively managed for tax-free income and low price volatility relative to the overall municipal bond market. "Tax-free investors want exactly that -- tax-free income," said Augustine. "They are generally risk averse and want low volatility and high current income. We manage the Fund with those goals in mind." Why a Mutual Fund?
As with every investment, it is important to diversify to lower risk. According to Augustine, "A mutual fund allows the investor to diversify by issue, industry, and region -- even within Connecticut. Investors need $5,000 to buy a single municipal bond at face value. Mutual fund investors can achieve a high degree of diversification in a cost-effictive way." Mutual fund, such as the Colonial Connecticut Tax-Exempt Fund, also offer a wide range of services: automatic deposit and withdrawal, reinvestment of distributions without sales charges, and 24-hour account information.
Founded in 1931, Boston-based Colonial Mutual Funds is one of the nation's oldest and most experienced investment management firms. Colonial has over $8.5 billion in assets under management in 35 mutual funds, servicing approximately 400,000 investors. (Colonial Mutual Funds is not associated with the Connecticut-based Colonial Realty Trust).
/CONTACT: William Rice of Colonial Mutual Funds, 800-225-2365/ CO: Colonial Mutual Funds ST: Connecticut IN: FIN SU: DD-SD -- NE001 -- 1105 11/05/91 09:03 EST