3 Municipal Bond Funds for Tax-Exempted Income
Municipal bonds, or "muni bonds," comprise debt securities issued by various states, cities, counties and other governmental entities to raise money to build roads, schools and a host of other projects for public good. These municipal securities regularly pay interest payments, usually semi-annually, and the original investment or principal amount at the time of maturity. Interest paid on such bonds is generally exempted from federal taxes making them especially attractive to people in higher income tax brackets.
Thus, risk-averse investors looking to earn a regular tax-free income may consider municipal bonds mutual funds. These mutual funds are believed to provide regular income while protecting the capital invested. While mutual funds from this category seek to provide dividends more frequently than other bonds, they offer greater stability than those primarily focusing on equity and alternative securities.
Below, we share with you three municipal bond funds, namely, AB Bond Fund, Inc. - AB Municipal Bond Inflation Strategy - Class A AUNAX, Colorado BondShares HICOX, and JPMorgan Tax Aware Real Return Fund TXRAX. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of funds, their Zacks Rank and past performance.
AB Bond Fund, Inc. - AB Municipal Bond Inflation Strategy - Class A invests most of its net assets in investment-grade, fixed-income municipal securities that pay interest exempt from federal taxation. AUNAX advisors also invest in below-investment-grade fixed-income securities, otherwise known as junk bonds.
AB Bond Fund, Inc. - AB Municipal Bond Inflation Strategy - Class A has three-year annualized returns of 1.7%. As of the end of July 2022, AUNAX held 67.55% of its net assets in miscellaneous bonds.
Colorado BondShares invests most of its assets along with borrowings, if any, in tax-exempt bonds, securities, notes, and municipal leases of political subdivisions, municipalities and public authorities in the State of Colorado. HICOX only invests in Tax-Exempted securities.
Colorado BondShareshas three-year annualized returns of 0.1%. HICOX has an expense ratio of 0.57% compared with the category average of 0.83%.
JPMorgan Tax Aware Real Return Fund seeks after-tax returns by investing most of its net assets in a portfolio of municipal securities whose interest payments are excluded from federal income tax. TXRAX creates inflation-protected instruments by investing in a combination of municipal securities along with inflation-linked derivatives such as Non-Seasonally Adjusted Consumer Price Index for all Urban Consumers (CPI-U) swaps.
JPMorgan Tax Aware Real Return Fund has three-year annualized returns of 1.0%.David P. Rooney has been the fund manager of TXRAX since March 2015.
To view the Zacks Rank and the past performance of all municipal bond funds, investors can click here to see the complete list ofmunicipal bond funds.
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