Debt securities will always be the natural choice of the risk-averse investor because this category of instruments provides regular income flow at low levels of risk. Income from regular dividends helps to ease the pain caused by plunging stock prices. When considering the safety of capital invested, municipal bond mutual funds are second only to those investing in government securities. In addition, the interest income earned form these securities are exempt from federal taxes and in many cases from state taxes as well.
Below we will share with you 5 top rated municipal bond mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all municipal bond funds, investors can click here to see the complete list of funds.
Nuveen High Yield Municipal Bond A (NHMAX) seeks high tax exempted current income. The fund invests a major portion of its assets in municipal bonds that provide tax free return. It primarily invests a minimum of 65% of its assets in bonds that are ranked between low and medium quality. It may also invest a maximum of 10% of its assets in municipal bonds that are categorized as defaulted bonds. The municipal bond mutual fund returned 16.8% over the last one year period.
John V. Miller is the fund manager and has managed this fund since 2000.
Delaware National High-Yield Municipal Bond A (CXHYX) invests heavily in municipal bonds that pay tax exempted return. The fund focuses on acquiring lower rated municipal securities having above average income prospect as well as greater risk. It seeks high tax free income. The municipal bond mutual fund returned 15.3% over the last one year period.
As of December 2014, this fund held 359 issues with 1.76% of its assets invested in Buckeye Ohio Tob Settlement Fi To 5.875%.
Oppenheimer Rochester High Yield Municipal A (ORNAX) seeks to provide tax-free income. A lion’s share of its assets is invested in those securities whose income is exempt from federal income tax. The fund primarily invests in municipal securities approved by the state governments, and its affiliates, and the District of Columbia. The municipal bond mutual fund returned 14.7% over the last one year period.
The fund has an expense ratio of 0.71% as compared to category average of 0.99%.
Goldman Sachs High Yield Municipal A (GHYAX) invests a majority of its assets in interest paying municipal bonds that provide return which is tax-exempted. The fund invests in securities that are issued by the government or its agencies and are believed to provide high yield. It seeks high tax free current income with capital growth. The non-diversified municipal bond mutual fund returned 12.5% over the last one year period.
As of December 2014, this fund held 595 issues with 1.89% of its assets invested in Jefferson Cnty Ala Swr Rev Swr Rev 6.5%.
Franklin CA High Yield Municipal A (FCAMX) seeks tax exempted high income. The fund invests a large share of its assets in municipal securities that pay interest which is exempted from taxes collected by the government and the State of California. It may also invest all of its assets in instruments that provide return subject to minimum tax. It may invest a maximum of 35% of its assets in municipal bonds approved by the US territories including Puerto Rico. The municipal bond mutual fund returned 14.4% over the last one year period.
The fund has an expense ratio of 0.63% as compared to category average of 0.92%.
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.
About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at www.zacks.com/funds/mutual-funds.
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