Municipal bonds, or “municipal bonds,” are issued by various states, cities, counties, and other government agencies to raise funds to build roads, schools, and other projects for the public good. It is made up of bonds. These municipal securities pay periodic interest, usually semi-annually, and the original invested amount or principal is paid back at maturity. The interest paid on such bonds is typically exempt from federal taxes, making them particularly attractive to people in high-income tax brackets.
Therefore, risk-averse investors looking to earn regular tax-free income may consider municipal bond mutual funds. These mutual funds are supposed to provide regular income while protecting your invested capital. Mutual funds in this category aim to provide dividends more frequently than other fixed-income securities, but offer greater stability than mutual funds that primarily focus on stocks and alternative securities.
Below, we introduce three municipal bond funds: American Funds Tax-Aware Conservative Growth and Income Portfolio TAIAX, Vanguard Ltd-Term Tax Exempted VMLTX, and Nuveen Limited Term Municipal Bond FLTDX. Each has 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, their Zacks Rank, and past performance.
American Funds’ tax-conscious, conservative growth and income portfolio invests most of its net assets in a variety of U.S. funds in varying combinations and weightings, generating income from its investments. This may include growth and earnings, equity returns, and balanced returns. and bond funds. TAIAX also focuses on high-dividend stocks, with some investments in emerging markets.
American Fund’s tax-aware, conservative growth and income portfolio has a three-year annualized return of 4.4%, and as of the end of April 2024, there are 7 TAIAX stocks.
The Vanguard Ltd-Term Tax Exempted Fund invests most of its net assets in municipal bonds that are rated in the top three credit rating categories by nationally recognized rating agencies or are of comparable quality by the Fund’s advisor. Masu. We also invest a portion of our net assets in securities with poor credit ratings. VMLTX Advisors seeks to maintain a dollar-weighted average maturity of individual securities between two and six years.
The Vanguard Ltd-Term Tax-Exempt Fund has a five-year annualized return of 1%. VMLTX’s expense ratio is 0.17%.
The Nuveen Limited Term Municipal Bond Fund invests most of its assets, if borrowed, in investment grade municipal bonds rated BBB/Baa or higher, and the interest paid is exempt from federal personal income tax. FLTDX Advisors also invests a portion of its assets in below-investment grade municipal bonds.
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The Nuveen Fixed Term Municipal Bond Fund has a five-year annualized return of 0.7%. Paul L. Brennan has been a fund manager for FLTDX since August 2006.
To see the Zacks Rank and past performance of all municipal bond funds, investors can click here for a complete list of municipal bond funds.
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