Back to top

Image: Bigstock

4 Top Ranked California Muni Bond Funds for Stable Return

Read MoreHide Full Article

California municipal bond funds invest in municipal debt obligations of issuers from the state. It provides the state’s investors stable income that is exempted from Federal and California income tax. Meanwhile, municipal bonds, informally called “munis”, are debt securities issued by state and local governments to borrow money. These are preferred by investors seeking a steady stream of tax free income in a choppy market. Munis come with lower yields compared to taxable bonds. However, they fetch better returns for investors in high tax brackets if we consider after-tax returns.

Below we share with you 4 top-rated California muni bond mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and we expect it to outperform its peers in the future. Investors can click here to see the complete list of muni bond funds.

Oppenheimer Rochester CA Municipal Y(OCAYX - Free Report) seeks a tax-exempted high level of current income. OCAYX invests a major portion of its assets in municipal securities that are expected to provide income exempted from federal and state income taxes. OCAYX normally invests more than 80% of its assets California municipal securities. As of July 19, 2016, Oppenheimer Rochester CA Municipal Y fund has returned 6.5%in the year-to-date frame.

OCAYX has an expense ratio of 0.71% compared to the category average of 0.87%.

Nuveen CA High Yield Municipal Bond A(NCHAX - Free Report) invests a large chunk of its assets in municipal debt obligations that provide interest income exempted from federal and California personal income tax. NCHAX invests in securities including bonds of the State of California or its affiliates, and debt obligations issued by the U.S. government. As of July 19, 2016, Nuveen CA High Yield Municipal Bond A fund has returned 6.9% in the year-to-date frame.

John Miller is the fund manager of NCHAX since 2006.

Franklin CA Insured Tax-Free Inc A seeks a tax-exempted high level of current income. FRCIX invests the majority of its assets in securities that are expected to pay interest free from federal alternative minimum tax, and from California personal income taxes. FRCIX also invests more than 65% of its assets in California municipal securities. As of July 18, 2016, Franklin CA Insured Tax-Free Inc A fund has returned 5.1%in the year-to-date frame.

FRCIX has an expense ratio of 0.59% compared to the category average of 0.87%.

American Century California High-Yield Municipal Investor (BCHYX - Free Report) invests a lion’s share of its assets in municipal securities that are expected to provide income exempted from federal and California income taxes. BCHYX seeks a tax-exempted high level of current income. BCHYX 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. As of July 18, 2016, American Century California High-Yield Municipal Investor fund has returned 6.2%in the year-to-date frame.

As of March 2016, BCHYX held 403 issues, with 3.23% of its assets invested in Foothill / Eastern TransnCorr Ref Re 6%.

To view the Zacks Rank and past performance of all muni bond mutual funds, investors can click here to see the complete list of muni bond 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 https://www.zacks.com/funds.

Published in