On the lookout for a Muni - Bonds fund? Starting with American Funds High Income Municipals Bond A (AMHIX Quick QuoteAMHIX - Free Report) is one possibility. AMHIX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

AMHIX 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

American Funds is based in Los Angeles, CA, and is the manager of AMHIX. Since American Funds High Income Municipals Bond A made its debut in September of 1994, AMHIX has garnered more than $5.75 billion 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. This fund in particular has delivered a 5-year annualized total return of 1.76%, 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 5.48%, 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 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.

If you believe interest rates will rise, this is an important factor to look at. AMHIX 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

It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. A fund's average coupon is simply its 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.

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. Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks.

AMHIX carries a beta of 0.78, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 1.3, 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 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, AMHIX is a load fund. It has an expense ratio of 0.68% compared to the category average of 0.91%. From a cost perspective, AMHIX is actually cheaper than its peers.

Investors should also note that the minimum initial investment for the product is $250 and that each subsequent investment needs to be at $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.

Your research on the Muni - Bonds segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.