Four Top-Ranked Municipal Bond Mutual Funds For Stable Returns
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, the interest income earned from these securities is exempt from federal taxes, and in many cases, from state taxes as well. Below, we will share with you four 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. To view the Zacks Rank and past performance of all municipal bond mutual funds, investors can click here . Federated Municipal High Yield Advantage Fund (MUTF: FHTFX ) invests in securities that are believed to provide federal tax-free interest income. It normally invests in long-term securities, but may also invest in securities of medium quality and that are rated below investment grade. The Federated Municipal High Yield Advantage F fund is non-diversified and has a three-year annualized return of 4.4%. Lee R. Cunningham II is one of the fund managers of FHTFX since 2009. American Century California High Yield Municipal Fund Investor (MUTF: BCHYX ) seeks a tax-exempted high level of current income. It invests a major share of its assets in municipal securities that are expected to provide income exempted from federal and California income taxes. The fund mainly invests in California municipal debt securities that are rated below investment grade and are expected to provide high yield. BCHYX may also invest in unrated securities. The fund is non-diversified and has a three-year annualized return of 5.1%. BCHYX has an expense ratio of 0.50%, as compared to the category average of 0.9%. PIMCO New York Municipal Fund A (MUTF: PNYAX ) invests a large portion of its assets in debt securities whose interest is exempted from regular federal income tax and New York income tax. It may invest in “private activity” bonds having interest, which is a tax-preference item for the purpose of the federal alternative minimum tax. The fund is non-diversified and has a three-year annualized return of 3.2%. Joe Deane is one of the executive vice presidents and has managed PNYAX since July 2011. Dreyfus High Yield Municipal Bond Fund (MUTF: DHMBX ) seeks a tax-exempted high level of current income. It invests the majority of its assets in municipal securities that are expected to provide return free from federal income tax. The fund is generally expected to maintain a dollar-weighted average maturity of more than 10 years. It is non-diversified and has a three-year annualized return of 3.6%. As of January 2016, DHMBX held 91 issues, with 3.71% of its assets invested in Tobacco Settlement Financing Corp N Asset 5%. Original Post