Municipal bonds, or "muni bonds," comprises debt securities that are issued by various states, cities, counties and other governmental entities to raise money to build roads, schools and a host of other projects for the public good. These municipal securities regularly pay interest payments, usually semi-annually, and pay the original investment or principal amount at the time of maturity. Interest paid on such bonds is generally exempted from federal taxes making them especially attractive to people in higher income tax brackets.
Thus, risk-averse investors looking to earn a regular tax-free income may consider municipal bonds mutual funds. These mutual funds are believed to provide regular income while protecting the capital invested. While mutual funds from this category seek to provide dividends more frequently than other bonds, they offer greater stability than those primarily focusing on equity and alternative securities.
Below, we share with you three top-ranked municipal bond funds, namely,
AB Municipal Bond Inflation Strategy ( AUNAX Quick Quote AUNAX - Free Report) , American Funds Tax-Aware Conservative Growth and Income Portfolio Class A ( TAIAX Quick Quote TAIAX - Free Report) , and Delaware National High Yield Municipal Bond Fund Class A ( CXHYX Quick Quote CXHYX - Free Report) . Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of funds, their Zacks Rank and past performance. AB Municipal Bond Inflation Strategy invests most of its net assets in high-quality investment-grade municipal fixed-income securities that pay interest exempt from federal taxation, and are rated A or better or the equivalent by one or more recognized rating agencies, AUNAX also invests a small portion of its assets in below-investment-grade fixed-income securities or junk bonds.
AB Municipal Bond Inflation Strategyhas three-year annualized returns of 3.4%. As of the end of January 2022, AUNAXhas 56.88% of its net assets invested in Miscellaneous Bonds.
American Funds Tax-Aware Conservative Growth and Income Portfolio Class A seek current income, which is exempted from federal income tax, along with long-term capital growth by investing most of its net assets in American as well emerging market funds, including growth-and-income, equity-income, and balanced and fixed-income funds in various proportion and weight. TAIAX also invests significantly in dividend-paying stocks.
American Funds Tax-Aware Conservative Growth and Income Portfolio Class Ahas three-year annualized returns of 5.5%. TAIAX has an expense ratio of 0.34% compared with the category average of 0.72%.
Delaware National High Yield Municipal Bond Fund Class A seeks a high level of exempted current income byinvesting most of its in assets along with borrowings, if any, in medium- and lower-grade municipal securities, which are exempted from federal income tax , CXHYX also invests in lower-rated municipal securities with higher income potential and involve greater risk.
Delaware National High Yield Municipal Bond Fund Class A has three-year annualized returns of 2.4%. Stephen J. Czepiel has been the fund manager of CXHYX since July 2007.
To view the Zacks Rank and the past performance of all municipal bond funds, investors can
click here to see the complete list of municipal bond funds. Want key mutual fund info delivered straight to your inbox?
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