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 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 3 top rated muni 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.
American High-Income Municipal Bond A (AMHIX - Free Report) seeks tax exempted high current income. AMHIX invests a lion’s share of its assets that provide a federal income tax free return or that have a return subject to minimum alternative federal tax. AMHIX invests a minimum of half of its assets in debt instruments that are BBB+ or Baa1 or below. AMHIX has a five-year annualized return of 7.3%.
AMHIX has an expense ratio of 0.68% as compared to category average of 0.99%.
Northern High Yield Municipal (NHYMX - Free Report) invests a large chunk of its assets in debt securities that are expected to pay federal tax-exempted interest. NHYMX allots a minimum of 65% of its assets to low quality securities or "junk bonds." However, NHYMX may invest a share of its assets in high quality securities and may invest all of its assets in these securities during unfavorable circumstances. NHYMX has a five-year annualized return of 6.5%.
M. Jane McCart is the fund manager and has managed NHYMX since 1998.
RidgeWorth High Grade Municipal Bond A (SFLTX - Free Report) seeks tax free current income with capital preservation. SFLTX is expected to invest a major portion of its assets in investment grade municipal derivatives that provide return free from regular federal income tax. SFLTX may invest the rest of its assets in cash or cash equivalents. SFLTX has a five-year annualized return of 5.9%.
As of March 2015, this fund held 47 issues with 4.8% of its assets invested in Miami-Dade Cnty Fla Sch Brd Ct Cops 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.
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. Pick the best mutual funds with the Zacks Rank.