There are plenty of choices in the Muni - Bonds category, but where should you start your research? Well, one fund that might be worth investigating is Vanguard High-Yield Tax-Exempt Investor (VWAHX Quick QuoteVWAHX - Free Report) . VWAHX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

VWAHX is one of many Muni - Bonds funds to choose from. Muni - Bonds funds invest in debt securities issued by states and local municipalities, which are typically used to pay for infrastructure construction, schools, and other government functions. These securities can be backed by taxes (revenue bonds), but others are known as "general obligation" and are not necessarily backed by a defined source. These bonds are especially attractive because of their inherent tax benefits.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VWAHX. Vanguard High-Yield Tax-Exempt Investor made its debut in December of 1978, and since then, VWAHX has accumulated about $1.72 billion in assets, per the most up-to-date date available. The fund's current manager, Mathew Kiselak, has been in charge of the fund since July of 2010.

Performance

Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 1.28%, and is in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 3.28%, which places it in the top third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. VWAHX's standard deviation over the past three years is 8.45% compared to the category average of 11.01%. The fund's standard deviation over the past 5 years is 7.42% compared to the category average of 10.28%. This makes the fund less volatile than its peers over the past half-decade.

Bond Duration

Modified duration is a measure of a given bond's interest rate sensitivity, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.

For those that believe interest rates will rise, this is an important factor to consider. VWAHX has a modified duration of 7.94, which suggests that the fund will decline 7.94% for every hundred-basis-point increase in interest rates.

Income

Since income is, of course, a big reason for purchasing a fixed income security, it is always important to consider the fund's average coupon. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 4.75% means that a $10,000 investment should result in a yearly payout of $475.

A higher coupon is good for those seeking a strong level of current income, but it could also pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond. Because income is only one part of the bond picture, investors should also consider risk relative to broad benchmarks.

With a beta of 0.84, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, VWAHX has a positive alpha of 1.29 , which measures performance on a risk-adjusted basis.

Ratings

Investors should also consider a bond's rating, which is a grade "AAA" to "D" given to a bond that indicates its credit quality. With this letter scale in mind, VWAHX has 23.78% in high quality bonds rated at least "AA" or higher, while 52.22% are of medium quality, with ratings of "A" to "BBB". The fund has an average quality of A, and focuses on high quality securities.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, VWAHX is a no load fund. It has an expense ratio of 0.17% compared to the category average of 0.78%. From a cost perspective, VWAHX is actually cheaper than its peers.

Investors need to be aware that with this product, the minimum initial investment is $3,000; each subsequent investment needs to be at least $1.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom Line

Overall, Vanguard High-Yield Tax-Exempt Investor ( VWAHX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Vanguard High-Yield Tax-Exempt Investor ( VWAHX ) looks like a good potential choice for investors right now.

This could just be the start of your research on VWAHX in the Muni - Bonds category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.