Debt securities will always be the natural choice for the risk-averse investor because this category of investment instruments provides 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, the interest incomes earned from these securities are exempt from federal taxes and in many cases from state taxes as well.
Below we will share with you 5 top municipal bond mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. 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.
Waddell & Reed Municipal High-Income A (UMUHX - MF report) seeks a high level of current income not subjected to Federal income tax. UMUHX invests a lion’s share of its assets in diversified portfolio of municipal bonds. UMUHX invests in municipal bonds having maturity between 10 to 30 years. UMUHX mostly invests in revenue bonds payable from sources including revenue from a project, a special tax, lease payments and/or appropriate funds. The Waddell & Reed Municipal High-Income A fund returned 5.4% over the last one year period.
UMUHX has an expense ratio of 0.90% as compared to category average of 0.96%.
MFS Arkansas Municipal Bond A (MFARX - MF report) invests a major portion of its assets in securities, where the interest is exempted from federal income tax and personal income tax, if any, of Arkansas. Interest from MFARX’s investments may be subject to the federal alternative minimum tax. The adviser generally invests MFARX’s assets in municipal instruments. The MFS Arkansas Municipal Bond A fund returned 3.7% over the last one year period.
