Standard & Poor’s downgrade of California last week raises a crucial question: does the Golden State’s debt at some point become no longer appropriate for conservative retail investors?

“California will honor its obligations, but it will take us on a roller-coaster ride,” said Tom Dalpiaz, a portfolio manager at Advisors Asset Management. “You have to recognize that if you invest in California state GOs, it’s going to be a roller-coaster.”

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