Last week’s answer

Based in little Rhode Island, I’m a global toy and leisure giant. I was founded in 1923 by the Hassenfeld Brothers. I began by selling textiles, but soon moved on to pencil boxes and school supplies. I bought Milton Bradley in 1984 and Parker Brothers in 1991. I introduced G.I. Joe, the world’s first “action figure,” in 1964, and Mr. Potato Head in 1952. My brands today include Playskool, Tonka Trucks, Super Soaker, Koosh, Nerf, Pokemon cards, Candy Land, Tinker Toy, Trivial Pursuit, Transformers, Easy-Bake Oven, Play Doh, Scrabble, Monopoly, Clue and Magic: The Gathering. Who am I? (Answer: Hasbro)

Municipal bonds

What can you tell me about municipal bonds? — Fred Waskowiak, Mesilla Park, N.M.

“Munis” are how many state and local government entities gather the funds for expenses such as building bridges, financing road improvements or even general purposes. They borrow the money from investors, and the fixed interest rate they pay these investors is usually exempt from federal taxes and often exempt from local taxes, though it’s taken into account by Social Security. Capital gains on municipal bonds are taxable, and munis sometimes trigger the Alternative Minimum Tax, so perhaps consult a tax adviser before purchasing any. Not all municipal bonds are alike. Some issuers are riskier than others, and rates vary. “General obligation” municipal bonds are backed by the issuer’s credit, while “revenue bonds” can be riskier, as they depend on the project being funded to generate the needed revenue.

When is the best time to buy and/or sell stock? — N.L., Huntsville, Ala.

Instead of seeking a magic day or month, ask yourself whether you’ve done enough research to determine that the company is financially healthy and growing, has sustainable advantages over its competitors, and has a promising future. Then determine whether the current stock price offers a good chance of growth. Some terrific companies might be priced so high that it’s hard to imagine them advancing much more in the next few years. Evaluating a company’s fair value is not easy, though. Measures such as price-to-earnings ratios and price-to-cash-flow ratios can help — see how current levels compare with historical averages.

Once you’re confident that you’ve found a great company selling at a good price, that’s probably the best time to buy. Aim to keep learning more about investing to improve your results.

To the moon

My biggest goof was buying some shares of stock without limiting the price I would pay for it. During the stock-market bubble period of a few years ago, I placed an order for shares of iVillage during its initial public offering. Shares were issued at $11, but by the time my order was filled, shares had zoomed to the moon. My order was filled at $92. Shares have recently been selling for less than $6 apiece. I avoid IPOs now, as I never want to see the moon again. — A.B., Flat Rock, N.C.

The Fool Responds: That’s a painful lesson, but it’s an important one. Stocks debuting via IPOs are often quite volatile, with their shares surging on excitement, as too many investors are willing to pay unreasonably high prices for companies that have yet to establish solid track records. If you like a company that’s coming public, simply keep an eye on it. Many times, such stocks fall back to earth within a year or so. Always buy only at a good price.

Yum! wins the world over

Fast food is racing along. McDonald’s (NYSE: MCD) recently reported positive August sales results. And Yum! Brands (NYSE: YUM) — the company behind the Taco Bell, Pizza Hut and KFC brands — followed up with internationally charged sales growth.

Yum! management said it was “comfortable” that it would match analyst earnings estimates of 60 cents per share in the third quarter and that full-year earnings would “at least” meet the company’s previous forecast of $2.36 per share, or $2.33 per share including adjustments.

Yum!’s international business has been doing well. For the four weeks ended Sept. 4, international sales climbed 17 percent over the same period last year, or 11 percent before currency conversion to U.S. dollars. Corresponding sales in America climbed 5 percent overall, led by a 7 percent gain at Taco Bell. Even the troubled KFC division chimed in with a second month of positive sales results, gaining 4 percent over last year.

Business is cooking. International sales are strong, KFC may be turning a corner, and the stock pays a dividend of nearly 1 percent. Add that up, and shares of the former Pepsi (NYSE: PEP) spinoff are at their highest ever, though neither particularly cheap nor expensive-looking with a price-to-earnings ratio around 18.

Saving for college

Saving for your child’s education can be tricky. To maximize savings while minimizing taxes, many folks are using Coverdell IRAs, formerly known as Education IRAs, and custodial accounts. There’s another good option: the 529 Plan.

A 529 Plan allows you to either prepay tuition for qualified colleges or save funds in a tax-free account to be used to pay higher education costs. You can do this for any child in your life — your child, your grandchild, or the child next door who mows your lawn. If you’re going back to school, you can even set up a 529 Plan for yourself. You don’t necessarily have to live in the state of the plan that you choose, either.

A 529 Plan allows you to sock away huge sums of money — more than $200,000 in some states — vs. the maximum annual Coverdell IRA contribution of $2,000. Most 529 Plans have no age or income limitations, so higher-bracket taxpayers can participate. Another big advantage is that the person who establishes the account decides when distributions may be taken.

There are no taxes on earnings in a 529 Plan, so you can build a big war chest much faster than if you had to pay taxes on the investment gains and income every year. When the money is used to pay for qualified college expenses, the earnings are free of federal taxes. This is true through 2010. Unless Congress extends the current provisions, withdrawals may be taxed beginning in 2011.

There are some drawbacks to 529 Plans. If the student doesn’t go to college, there may be a 10 percent penalty on the earnings, depending on the circumstances.

Additionally, the funds in the 529 Plan account are handled by plan administrators, not by you, which is actually a plus for some folks. Finally, once the money is in the plan, it must stay there — or in another 529 Plan.

Still, 529 Plans are many people’s best bets. Some are much better than others, though. Learn more about 529 Plans and other college financing topics at www.savingforcollege.com, www.collegeboard.com and www.fool.com/college.