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Is NHMAX a Strong Bond Fund Right Now?

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There are plenty of choices in the Muni - Bonds category, but where should you start your research? Well, one fund that may not be worth investigating is Nuveen High Yield Municipals Bond A (NHMAX - Free Report) . NHMAX bears a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes NHMAX as Muni - Bonds, which is a segment packed with options. Muni - Bonds funds invest in debt securities issued by states or local municipalities. These are generally used to finance construction of infrastructure, pay for schools, or other government functions. Some are backed by taxes (revenue bonds), while others are " general obligation " and may not be backed by a defined source. Investors usually appreciate the tax benefits that come with many municipal bonds, which are especially impressive for those in high tax brackets.

History of Fund/Manager

Nuveen is responsible for NHMAX, and the company is based out of Chicago, IL. Since Nuveen High Yield Municipals Bond A made its debut in June of 1999, NHMAX has garnered more than $5.79 billion in assets. John V. Miller is the fund's current manager and has held that role since December of 2000.

Performance

Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 6.69%, 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 4.72%, which places it in the top third during this time-frame.

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. Over the past three years, NHMAX's standard deviation comes in at 4.88%, compared to the category average of -37.69%. The fund's standard deviation over the past 5 years is 4.28% compared to the category average of -3.57%. This makes the fund more volatile than its peers over the past half-decade.

Bond Duration

Modified duration is a measure of a specific bond's interest rate sensitivity, and is an excellent way to judge how fixed income securities will respond to a shifting rate environment.

For those that believe interest rates will rise, this is an important factor to consider. NHMAX has a modified duration of 9.81, which suggests that the fund will decline 9.81% 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. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 6.72% means that a $10,000 investment should result in a yearly payout of $672.

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. This fund has a beta of 1.35, meaning that it is more volatile than a broad market index of fixed income securities. Taking this into account, NHMAX has a positive alpha of 2.14, 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, NHMAX 's junk bond component-bonds rated 'BB' or below-is at 31.38%. This means that the fund has an average quality of BBB, and focuses on medium quality securities.

However, it is worth noting that 49 % of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, NHMAX is a load fund. It has an expense ratio of 0.76% compared to the category average of 0.57%. Looking at the fund from a cost perspective, NHMAX is actually more expensive than its peers.

This fund requires a minimum initial investment of $3,000, and each subsequent investment should be at least $100.

Bottom Line

Overall, Nuveen High Yield Municipals Bond A ( NHMAX ) has a low Zacks Mutual Fund rank, strong performance, worse downside risk, and higher fees compared to its peers.

This could just be the start of your research on NHMAXin 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. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.




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