Mutual funds having significant exposure to municipal bonds, which are also known as “munis,” provide an excellent choice for risk-averse investors looking to derive stable tax-free returns. These funds seek to provide returns with a low level of risk by investing in municipal debt securities issued by state and local governments.
These securities are believed to provide steady returns exempted from federal taxes and in many cases from state taxes as well, which is why investors prefer these securities in a choppy market. Though munis are expected to provide lower yields than taxable bonds, they fetch better returns for investors in high tax brackets if we consider after-tax returns.
Below we share with you three top-rated municipal bond mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of funds.
Hartford Municipal Real Return A HTNAX seeks current income. HTNAX primarily invest in tax-exempt obligations issued by states, territories, and possessions of the United States, and their political subdivisions, agencies and instrumentalities. A large portion of the tax-exempt obligations purchased by the fund will be of “investment grade” quality. Hartford Municipal Real Return A returned 2.4% over the past three years.
HTNAX has an expense ratio of 0.70% compared with the category average of 0.81%.
Oppenheimer Rochester NJ Municipal A ONJAX invests the majority of its assets in securities, the income from which is exempt from regular federal individual and, as applicable, the fund’s state income tax. ONJAX invests a minimum 80% of its assets in New Jersey municipal securities. Oppenheimer Rochester NJ Municipal A is a non-diversified fund and has returned 5.5% in the past three years.
As of December 2016, ONJAX held 192 issues, with 5.03% of its assets invested in Childrens Tr Fd P R Tob Settle To 5.625%
Goldman Sachs Dynamic Municipal Income A GSMIX seeks a high level of current income that is exempt from regular federal income tax. GSMIX invests a major portion of its assets in fixed income securities issued by or on behalf of states, territories and possessions of the United States. Goldman Sachs Dynamic Municipal Income A returned 3.8% over the past three years.
GSMIX has an expense ratio of 0.78% compared with the category average of 0.81%.
To view the Zacks Rank and past performance of all municipal bond mutual funds, investors can click here to see the complete list of funds.
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