The debt securities category will always be the first choice for risk-averse investors because this class of instruments provides a regular income at low levels of risk. Income from regular dividends helps to ease the pain caused by plunging stock prices. 

 

When considering the safety of capital invested, municipal bond mutual funds are second only to those investing in government securities. In addition, interest income earned from these securities is exempt from federal taxes and, in many cases, from state taxes. 

 

Below, we share with you three top-ranked municipal bond funds, viz., American High-Income Municipal Bond (AMHIX Quick QuoteAMHIX - Free Report) , Colorado BondShares A Tax-Exempt (HICOX Quick QuoteHICOX - Free Report) and Vanguard High-Yield Tax-Exempt (VWAHX Quick QuoteVWAHX - Free Report) . Each has 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 municipal bond funds. 

 

American High-Income Municipal Bond fund seeks to provide a high level of current income exempt from regular federal taxes. AMHIX invests in tax-exempt securities and debt securities rated Baa/BBB or below at the time of purchase. 

 

American High-Income Municipal Bond has three-year annualized returns of 7.8%. Chad M. Rach has been one of the fund managers of AMHIX since 2011. 

 

Colorado BondShares A Tax-Exempt fund seeks opportunities for capital appreciation. HICOX invests in tax-exempt bonds and other tax-exempt securities, including tax-exempt notes and tax-exempt municipal leases of the State of Colorado, its political subdivisions, municipalities and public authorities.

 

Colorado BondShares A Tax-Exempt has three-year annualized returns of 7.6%. HICOX has an expense ratio of 0.56%. 

 

Vanguard High-Yield Tax-Exempt fund seeks the maximum level of income exempt from federal income tax. VWAHX invests in medium-quality municipal bonds and in derivatives, including future and options contracts. 

 

Vanguard High-Yield Tax-Exempt has three-year annualized returns of 7%. As of the end of July 2025, VWAHX held 82.6% of its net assets in miscellaneous bonds.  

 

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. 

 

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week.???Get it free >>The debt securities category will always be the first choice for risk-averse investors because this class of instruments provides a regular income at low levels of risk. Income from regular dividends helps to ease the pain caused by plunging stock prices. 

 

When considering the safety of capital invested, municipal bond mutual funds are second only to those investing in government securities. In addition, interest income earned from these securities is exempt from federal taxes and, in many cases, from state taxes. 

 

Below, we share with you three top-ranked municipal bond funds, viz.,???American High-Income Municipal Bond???(AMHIX Quick QuoteAMHIX - Free Report) , Colorado BondShares A Tax-Exempt???(HICOX Quick QuoteHICOX - Free Report) and Vanguard High-Yield Tax-Exempt???(VWAHX Quick QuoteVWAHX - Free Report) . Each has 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 municipal bond funds. 

 

American High-Income Municipal Bond fund seeks???to provide a high level of current income exempt from regular federal taxes. AMHIX invests in???tax-exempt securities and debt securities rated Baa/BBB or below at the time of purchase. 

 

American High-Income Municipal Bond has three-year annualized returns of 7.8%. Chad M. Rach has been one of the fund managers of AMHIX since 2011. 

 

Colorado BondShares A Tax-Exempt???fund seeks opportunities for capital appreciation. HICOX invests in tax-exempt bonds and other tax-exempt securities, including tax-exempt notes and tax-exempt municipal leases of the State of Colorado, its political subdivisions, municipalities and public authorities.??? 

 

Colorado BondShares A Tax-Exempt???has three-year annualized returns of 7.6%. HICOX has an expense ratio of 0.56%. 

 

Vanguard High-Yield Tax-Exempt???fund seeks the maximum level of income exempt from federal income tax. VWAHX invests in medium-quality municipal bonds and in derivatives, including future and options contracts. 

 

Vanguard High-Yield Tax-Exempt has three-year annualized returns of 7%. As of the end of July 2025, VWAHX held 82.6% of its net assets in miscellaneous bonds.  

 

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. 

 

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Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week.???Get it free >>