MMunicipal bonds, or “muni bonds,” include debt securities issued by various states, cities, counties, and other government entities to raise money to build roads, schools, and a host of other projects for the public good. . These municipal securities pay regular interest payments, usually semi-annually, and repay the initial investment or principal amount at maturity. The interest paid on these bonds is generally exempt from federal taxes, which makes them especially attractive to people in higher tax brackets.
Thus, risk-averse investors looking to earn regular tax-free income may consider municipal bond mutual funds. These mutual funds are meant to provide regular income while protecting invested capital. Although mutual funds in this category seek to pay dividends more frequently than other bonds, they offer greater stability than those that focus primarily on stocks and alternative securities.
Below, we share with you three top municipal bond funds, namely, AB Municipal Bond Inflation Strategy AUNAX, U.S. Funds Tax Conservative Income & Growth Portfolio Class A TAIAX, and Delaware National High Yield Municipal Bond Fund Class A CXHYX. Each earned a Zacks Mutual Fund Ranking #1 (Strong Buy) and are expected to outperform their peers going forward. Investors can click here to see the full list of funds, their Zacks ranking and past performance.
AB Municipal Bond Inflation Strategy invests most of its net assets in high quality municipal fixed income securities that pay interest exempt from federal tax and are rated A or better or equivalent by one or more recognized rating agencies, AUNAX also invests a small part of its assets in lower quality fixed income securities or junk bonds.
AB Municipal Bond Inflation Strategy has three-year annualized returns of 3.4%. At the end of January 2022, AUNAX had 56.88% of its net assets invested in various bonds.
U.S. Funds Tax Conservative Income & Growth Portfolio Class A seek current income, which is exempt from federal income tax, as well as long-term capital growth by investing most of its net assets in U.S. and emerging market funds, including growth funds and income, fixed income equities, and balanced and fixed funds. income funds in various proportions and weights. TAIAX also invests significantly in dividend-paying stocks.
US Funds Conservative Growth and Income Tax Portfolio Class A has three-year annualized returns of 5.5%. TAIAX has an expense ratio of 0.34% against a category average of 0.72%.
Delaware National High Yield Municipal Bond Fund Class A seeks a high level of exempt current income by investing the majority of its assets in assets as well as borrowing, if any, in mid- and lower-quality municipal securities, which are exempt from federal income tax, CXHYX also invests in lower rated municipal securities with higher income potential and involves higher risk.
The Delaware National High Yield Municipal Bond Fund Class A has three-year annualized returns of 2.4%. Stephen J. Czepiel has been CXHYX’s fund manager since July 2007.
To view the Zacks ranking and past performance of all municipal bond funds, investors can click here to view the full list of municipal bond funds.
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