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 American Funds High Income Municipals Bond A (AMHIX Quick QuoteAMHIX - Free Report) . AMHIX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

We classify AMHIX in the Muni - Bonds category, an area rife with potential choices. Muni - Bonds funds focus their investments on debt securities issued by state and local governments. These are typically used to pay for the construction of infrastructure, the operation of public schools, and other municipal functions. These securities can come in the form of revenue bonds, which are backed by taxes, as well as "general obligation" bonds that are not backed by a defined source. Investors are usually interested that come with most municipal bonds, which can be especially important for those in higher tax brackets.

History of Fund/Manager

AMHIX finds itself in the American Funds family, based out of Los Angeles, CA. The American Funds High Income Municipals Bond A made its debut in September of 1994 and AMHIX has managed to accumulate roughly $5.33 billion in assets, as of the most recently available information. The fund's current manager is a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 2.67%, and is in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 7.76%, 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. The standard deviation of AMHIX over the past three years is 7.05% compared to the category average of 11.07%. The fund's standard deviation over the past 5 years is 7.26% compared to the category average of 12.13%. 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.

If you believe interest rates will rise, this is an important factor to look at. AMHIX has a modified duration of 6.9, which suggests that the fund will decline 6.9% for every hundred-basis-point increase in interest rates.

Income

Income is often a big reason for purchasing a fixed income security, so it is important to consider the fund's average coupon. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 4.5% means that a $10,000 investment should result in a yearly payout of $450.

If you are looking for a strong level of current income, a higher coupon is a good choice, though it could pose a reinvestment risk; these risks can occur 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.

This fund has a beta of 0.69, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, AMHIX has a positive alpha of 1.82, 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, AMHIX has 28.5% in medium quality bonds, with ratings of "A" to "BBB". The fund's junk bond component-bonds rated "BB" or below-is at 13.1%, giving AMHIX an average quality of BBB. This means that it focuses on medium quality securities.

However, it is worth noting that 38% of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, AMHIX is a load fund. It has an expense ratio of 0.66% compared to the category average of 0.93%. Looking at the fund from a cost perspective, AMHIX is actually cheaper than its peers.

Investors need to be aware that with this product, the minimum initial investment is $250; each subsequent investment needs to be at least $50.

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

Bottom Line

Overall, American Funds High Income Municipals Bond A ( AMHIX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, American Funds High Income Municipals Bond A ( AMHIX ) looks like a good potential choice for investors right now.

This could just be the start of your research on AMHIX 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.