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3 Top California Muni Bond Mutual Funds for Strong Gains

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California municipal bond mutual funds seek tax-free stable income by investing in municipal debt obligations of issuers from the state. These mutual funds are expected to offer the state’s investors a federal income tax and California state income tax exempted steady income. Moreover, municipal bonds or “munis” are preferred by investors seeking a steady stream of tax free income in a volatile market. Though munis come with lower yields than taxable bonds, they fetch better returns for investors in high tax brackets if we consider after-tax returns.

Below we share with you four top-rated California muni bond mutual funds. Each has earned 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 muni bond funds.

American Century California High-Yield Municipal Investor BCHYX invests a large chunk of its assets in municipal securities that are expected to provide income free from federal and California income taxes. BCHYX seeks a tax-exempted high level of current income. The fund mainly invests in California municipal debt securities that are rated below investment grade and expected to provide high yield. BCHYX may also invest in unrated securities. American Century California High-Yield Municipal Investor has one-year annualized returns of 3.1%.

As of June 2018, BCHYX held 501 issues, with 2.80% of its assets invested in FOOTHILL / EASTERN TRANSN CORRIDOR AGY CALIF 6%.

Lord Abbett CA Tax-Free Income F (LCFFX - Free Report) seeks federal tax-free income. The fund invests heavily in muni bonds that offer interest free from federal income tax as well as California personal income tax. LCFFX attains its investment goal by measuring the Barclays Municipal Bond Index’s volatility as an estimate of reasonable risk. Lord Abbett CA Tax-Free Income F has one-year annualized returns of 2%.

LCFFX has an expense ratio of 0.68% compared with the category average of 0.90%.

BlackRock California Municipal Opportunities Fund Investor A1 MDCMX invests the majority of its assets in California municipal bonds. MDCMX invests more than half of its assets in investment-grade securities. The fund may also invest in fixed-rate and variable-rate obligations. The fund seeks to offer income free from Federal and California income taxes. BlackRock California Municipal Opportunities Fund Investor A1 has one-year annualized returns of 3.6%.

Walter O'Connor is one of the fund managers of MDCMX since 1993.

To view the Zacks Rank and past performance of all muni bond mutual funds, investors can click here to see the complete list of muni bond funds.

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