The debt securities category will always be the first choice for risk-averse investors because this class of instruments provides a 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, interest income earned from these securities is exempt from federal taxes and in many cases from state taxes as well.
Below we share with you four top-ranked 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 .
American High-Income Municipal Bond F-1 ABHFX seeks growth of income free from regular federal income tax. ABHFX invests the lion’s share of its assets in securities that are exempted from regular federal income tax. The fund also invests a minimum of half of its portfolio in BBB+ or lower or Baa1 or lower rated debt securities. American High-Income Municipal Bond F-1 has returned 2.8% year to date (YTD).
ABHFX has an expense ratio of 0.74% compared with the category average of 1.10%.
AB Municipal Bond Inflation Strategy A AUNAX invests primarily in securities of the municipal sector which pays interest free from federal taxation. It invests a bulk of its total assets in A or higher rated fixed-income securities. AB Municipal Bond Inflation Strategy A has returned 2.1% YTD.
Robert Davidson is one of the fund managers of AUNAX since 2010.
Baird Quality Intermediate Municipal Bond Fund Class Investor BMBSX seeks current income that is free from federal income tax. BMBSX invests its assets primarily in a portfolio of bonds and debentures. The fundinvests in municipal debts of governmental establishments throughout the U.S. and its states. Baird Quality Intermediate Municipal Bond Fund Class Investor has returned 2% YTD.
BMBSX has an expense ratio of 0.55% compared with the category average of 0.94%.
Dreyfus Short-Intermediate Municipal Bond Fund Class I DIMIX invests a bulk of its assets in Baa/BBB or higher rated municipal bonds that offer income exempted from federal personal income tax. DIMIX seeks maximization of current income free from federal income tax. Dreyfus Short-Intermediate Municipal Bond Fund Class I has returned 1.5% YTD.
As of March 2017, DIMIX held 175 issues, with 1.59% of its assets invested in Citizens Ppty Ins Corp Fla Senior Se 5%.
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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