Top 5 Highest Yielding Municipal Bond Funds - Highest Yielding Zacks #1 Ranked Funds

Conservative investors select debt securities over other investments since they provide a regular source of income at low levels of risk. They often reduce the pain incurred from falling share prices by providing regular dividends. Mutual funds investing in municipal bonds are second only to those investing in government securities when it comes to safety of capital invested. Additionally, the interest income earned form these securities are exempt form federal taxes and in many cases from state taxes as well.

Below we will share with you the 5 highest yielding Zacks #1 ranked 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 funds, then click here. 

Pioneer High Income Municipal A (PIMAX) seeks to maximize total return. The majority of its assets are invested in municipal debt securities. The interest income earned form these securities are exempt from regular federal income tax. The municipal bond mutual fund returned 12.45% in the last one year period.

The municipal bond mutual fund has a minimum initial investment of $1,000 and an expense ratio of 0.90% compared to a category average of 1.05%.

Invesco Van Kampen High Yield Municipal A (ACTHX) invests a large portion of its assets in medium and low grade municipal securities. Securities are selected only if the associated risk is reasonable with respect to the objectives of the fund. The municipal bond mutual fund has a ten year annualized return of 4.49%.

The Fund Manager is James Phillips and he has managed this municipal bond mutual fund since 2002.

Aim High Income Municipal A (AHMAX) seeks high current income exempt from federal income taxes by investing in a diversified portfolio of municipal securities. The majority of the fund's assets are invested in municipal bond securities that are rated BBB/Baa or lower by Standard & Poor's Ratings Services or other nationally renowned rating firms. The municipal bond mutual fund returned 7.87% in the last one year period.

As of September 2010, this municipal bond mutual fund held 644 issues, with 0.91% of its total assets invested in Moon Indl Dev Auth Pa.

Waddell & Reed Municipal High Income A (UMUHX) invests at least 80% of its assets in tax-exempt municipal bonds. The fund holds a well diversified portfolio of bonds rated investment grade or lower. The municipal bond mutual fund returned 7.08% over the last one year period and has a five year annualized return of 3.82%.

The municipal bond mutual fund has a minimum initial investment of $500 and an expense ratio of 0.93% compared to a category average of 1.05%.

BlackRock High Yield Municipal A (MDYHX) seeks high income exempt from federal income taxes. The fund invests primarily in municipal bonds. At least 65$ of its assets are utilized to purchase bonds of medium to low quality. The municipal bond mutual fund returned 10.23% over the last one year period.

The Fund Manager is Theodore Jaeckel Jr. and he has managed this municipal bond mutual fund since 2006.

To view the Zacks Rank and past performance of all municipal bond funds, then click here.

About Zacks Mutual Fund Rank

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at http://www.zacks.com/funds/mutualfund/