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 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 funds.
Vanguard New Jersey Long-Term Tax-Exempt Fund Investor Shares (VNJTX - Free Report) aims to provide current income exempted from federal and New Jersey personal income taxes. The fund mostly invests in high-quality municipal bonds issued by New Jersey state and local governments, regional governmental and public financing authorities. This is a non-diversified fund. VNJTX has three-year annualized returns of 3.8%.
VNJTX has an expense ratio of 0.17% compared with the category average of 0.89%.
Fidelity New Jersey Municipal Income Fund (FNJHX - Free Report) seeks to offer a high level of current income that is exempt from federal and New Jersey personal income taxes.The non-diversified fund invests the majority of itsassets ininvestment-grade municipal securities. The interest from these securities is usually exempt from federal and New Jersey personal income taxes. FNJHX has three-year annualized returns of 3.3%.
Cormac Cullen is the fund manager of FNJHX since 2016.
Vanguard Long-Term Tax-Exempt Fund (VWLTX - Free Report) aims to offer a high level of current income that is exempted from federal personal income taxes. The fund mostly invests in municipal bonds in the top three credit-rating categories as determined by a nationally recognized statistical rating organization or Moody's Investors Service, Inc. In case it is unrated, the advisor takes a call regarding the security’s quality. VWLTXhas three-year annualized returns of 2.9%.
As of December 2018, VWLTX held 1838 issues, with 1.26% of its assets invested in Cmt Municipal Rate.
Lord Abbett Intermediate Tax-Free Fund Class F (LISFX - Free Report) aims to offer the maximum interest income exempt from federal income tax as is consistent with reasonable risk associated. The fund invests the majority of its assets in municipal bonds that pay interest exempted from federal income tax. LISFXhas three-year annualized returns of 2.3%.
LISFX has an expense ratio of 0.60% compared with the category average of 0.75%.
To view the Zacks Rank and past performance of all municipal bond mutual funds, investors can click here to see the complete list of funds.
Want key mutual fund info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>