The debt securities category will always be the first choice for risk-averse investors because this class of instruments provides a regular income flow at low levels of risk. Income from regular dividends helps to ease the pain caused by plunging stock prices.
When considering the safety of capital invested, municipal bond mutual funds are second only to those investing in government securities. In addition, interest income earned from these securities is exempt from federal taxes and in many cases from state taxes as well.
Below we share with you three top-ranked municipal bond mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of funds.
Hartford Municipal Real Return Fund A HTNAX seeks to offer income free from federal income tax. HTNAX heavily invests in obligations of states, agencies, instrumentalities and their political subdivisions which are free from tax. A large portion of the tax-exempt obligations bought by the fund will be of “investment grade” quality. Hartford Municipal Real Return Fund A has returned 0.7% in the last one year.
HTNAX has an expense ratio of 0.70% compared with the category average of 0.80%.
MFS Municipal Income Fund A MFIAX seeks a high level of income free from federal income tax. MFIAX invests, under normal market conditions, a large chunk of its net assets in securities and other investments, whose interest is free from federal income tax. To meet this policy, MFIAX may invest in municipal instruments that finance projects related to education, housing, utilities, healthcare, water and sewers. MFS Municipal Income Fund A has returned 0.2% in the last one year.
Jason Kosty is one of the fund managers of MFIAX since 2015.
Oppenheimer Rochester Fund Municipals Fund A RMUNX primarily invests its assets in securities, income from which is free from federal individual and the fund's state income tax. RMUNX may also invest almost one-fourth of its assets in below-investment-grade securities. Oppenheimer Rochester Fund Municipals Fund A has returned 4.4% in the last one year.
As of May 2017, RMUNX held 778 issues, with 2.97% of its assets invested in Puerto Rico Sales Tax Fing Cor Sal 5.25%.
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.
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Zacks Investment Research