Having trouble finding a Muni - Bonds fund? American Funds High Income Municipals Bond F (ABHFX Quick QuoteABHFX - Free Report) is a potential starting point. ABHFX bears a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

ABHFX 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

ABHFX finds itself in the American Funds family, based out of Los Angeles, CA. Since American Funds High Income Municipals Bond F made its debut in September of 1994, ABHFX has garnered more than $154.00 million in assets. A team of investment professionals is the fund's current manager.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. ABHFX has a 5-year annualized total return of 1.74%, 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 5.45%, 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. ABHFX's standard deviation over the past three years is 6.24% compared to the category average of 9.94%. The fund's standard deviation over the past 5 years is 7.26% compared to the category average of 11.6%. 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, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.

For those that believe interest rates will rise, this is an important factor to consider. ABHFX has a modified duration of 6.91, which suggests that the fund will decline 6.91% for every hundred-basis-point increase in interest rates.

Income

We must remember to consider the fund's average coupon, as income is traditionally a big reason for purchasing a fixed income security. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 4.6% means that a $10,000 investment should result in a yearly payout of $460.

While a higher coupon is good for when you want a strong level of current income, it could present a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond. Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks.

With a beta of 0.78, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, ABHFX has a positive alpha of 1.27 , 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, ABHFX has 20.76% in high quality bonds rated at least "AA" or higher, while 26.03% are of medium quality, with ratings of "A" to "BBB". The fund has an average quality of BBB, and focuses on medium quality securities.

However, it is worth noting that 39% 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, ABHFX is a no load fund. It has an expense ratio of 0.71% compared to the category average of 0.91%. ABHFX is actually cheaper than its peers when you consider factors like cost.

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 F ( ABHFX ) 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 F ( ABHFX ) looks like a good potential choice for investors right now.

Don't stop here for your research on Muni - Bonds funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare ABHFX to its peers as well for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.