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3 Top-Ranked Municipal Bond Funds for Tax-Exempted Income
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Municipal bonds, or "muni bonds," comprise debt securities issued by various states, cities, counties and other governmental entities to raise money to build roads, schools and a host of other projects for public good. These municipal securities make regular interest payments, usually semi-annually, and 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 bond 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.
Colorado BondShares fund invests most of its assets along with borrowings, if any, in tax-exempt bonds, securities, notes, and municipal leases of political subdivisions, municipalities and public authorities in the State of Colorado. HICOX only invests in Tax-Exempted securities.
Colorado BondShares fund has three-year annualized returns of 2.1%.As of the end of March 2024, HICOX held 32.4% of its net assets in miscellaneous bonds.
AB Municipal Bond Inflation Strategy fund invests most of its net assets in investment-grade, fixed-income municipal securities that pay interest exempt from federal taxation. AUNAX advisors also invest in below-investment-grade, fixed-income securities, otherwise known as junk bonds.
AB Municipal Bond Inflation Strategy fund has three-year annualized returns of 1%. AUNAX has an expense ratio of 0.76%.
Invesco Limited Term Municipal Income Fund seeks income exempted from federal tax by investing most of its assets along with borrowings, if any, in investment-grade municipal debt securities that either pay interest that are excluded from gross income for federal income tax purposes or do not produce income that will be considered an item of preference for purposes of the alternative minimum tax. AITFX advisors try to maintain a dollar-weighted average with an effective portfolio maturity of five years or less.
Invesco Limited Term Municipal Income Fundhas five-year annualized returns of 0.8%. Michael Magee has been the fund manager of AITFX since July 2021.
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3 Top-Ranked Municipal Bond Funds for Tax-Exempted Income
Municipal bonds, or "muni bonds," comprise debt securities issued by various states, cities, counties and other governmental entities to raise money to build roads, schools and a host of other projects for public good. These municipal securities make regular interest payments, usually semi-annually, and 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 bond 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 municipal bond funds, namely, Colorado BondShares (HICOX - Free Report) , AB Municipal Bond Inflation Strategy (AUNAX - Free Report) and Invesco Limited Term Municipal Income Fund (AITFX - 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.
Colorado BondShares fund invests most of its assets along with borrowings, if any, in tax-exempt bonds, securities, notes, and municipal leases of political subdivisions, municipalities and public authorities in the State of Colorado. HICOX only invests in Tax-Exempted securities.
Colorado BondShares fund has three-year annualized returns of 2.1%.As of the end of March 2024, HICOX held 32.4% of its net assets in miscellaneous bonds.
AB Municipal Bond Inflation Strategy fund invests most of its net assets in investment-grade, fixed-income municipal securities that pay interest exempt from federal taxation. AUNAX advisors also invest in below-investment-grade, fixed-income securities, otherwise known as junk bonds.
AB Municipal Bond Inflation Strategy fund has three-year annualized returns of 1%. AUNAX has an expense ratio of 0.76%.
Invesco Limited Term Municipal Income Fund seeks income exempted from federal tax by investing most of its assets along with borrowings, if any, in investment-grade municipal debt securities that either pay interest that are excluded from gross income for federal income tax purposes or do not produce income that will be considered an item of preference for purposes of the alternative minimum tax. AITFX advisors try to maintain a dollar-weighted average with an effective portfolio maturity of five years or less.
Invesco Limited Term Municipal Income Fundhas five-year annualized returns of 0.8%. Michael Magee has been the fund manager of AITFX since July 2021.
To view the Zacks Rank and the past performance of all municipal bond funds, investors can click here to see the complete list ofmunicipal bond funds.
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